USDT banned in Europe from December 30: What to expect on crypto exchanges?

The European Union is preparing to take a major step in the regulation of cryptos with the imminent entry into force of the MiCA (Markets in Crypto-Assets) rules. This initiative, hailed by some as a step towards better transparency and an increased fight against financial abuse, however triggers serious concerns among industry players. Indeed, the regulations require the withdrawal of USDT, the most used stablecoin in the world, from regulated platforms within the EU. Such a decision could upset the balance of European markets and call into question their attractiveness on the world stage.

The USDT Ban and Its Immediate Impacts

The rules established by the MiCA (Markets in Crypto-Assets) regulatory framework, which will come into force on December 30, 2024, impose strict obligations on stablecoin issuers. These requirements include obtaining an e-money license, establishing significant reserves, and rigorous supervision of associated transactions. These constraints aim to guarantee increased transparency and limit the risks of financial fraud. However, the absence of a license issued to Tether Limited has a direct and significant consequence: the withdrawal of USDT, the most used stablecoin in the world, from regulated platforms in the European Union.

This withdrawal triggers serious concerns due to the central role of USDT in crypto trading. “A large majority of crypto transactions are based on USDT, in particular for its ease of use and low costs,” said Pascal St-Jean, CEO of 3iQ Corp. The absence of this stablecoin, which serves as the cornerstone of trading pairs around the world, risks seriously disrupting the liquidity of European markets. Thus, the first signs of this disruption are already visible. For example, OKX, a platform that has already retired USDT in Europe, has seen a shift towards fiat currencies and other stablecoins. Despite this transition, alternative solutions fail to effectively fill the void left by USDT. The fragmentation of transactions, coupled with increased costs for investors, fuels concerns about the fluidity of markets and the competitiveness of the region.

A contested European strategy

While Europe takes a strict approach towards cryptos, other regions are moving towards more permissive strategies. In the United States, the recent election of Donald Trump and his declarations in favor of pro-crypto policies have reignited investor enthusiasm. This contrast illustrates a clear divergence in geopolitical priorities. While America aims to drive innovation and adoption, Europe prioritizes control and compliance. However, this European choice raises questions about its ability to remain competitive on the world stage.

The numbers reflect this critical dynamic. Additionally, venture capital investments in European crypto startups have fallen to their lowest level in four years, reflecting investors' distrust of a regulatory environment deemed too oppressive. Furthermore, MiCA, although ambitious in its desire to regulate the market, could unintentionally encourage operators to migrate to more flexible jurisdictions. This potential flight of talent and capital would further weaken an ecosystem already weakened by uncertainty and lack of financing.

Beyond the immediate impacts on the markets, this debate raises a fundamental question: how can Europe reconcile regulation and innovation without compromising its competitiveness? The balance to find is delicate. While transparency and stability are essential to building trust in cryptos, imposing rules that are too rigid risks slowing down technological progress and limiting the region's attractiveness for entrepreneurs and investors. This dilemma places Europe face to face with a risky situation whose consequences could permanently reshape its place in the global digital ecosystem.

The withdrawal of USDT highlights a key challenge for Europe: succeeding in reconciling its ambition for strict regulation with the need to remain competitive in the global digital economy. The move triggers major concerns, which range from fragmentation of liquidity to increased costs for investors. Added to this is the threat of an exodus of talents and businesses towards regions more favorable to innovation. If MiCA constitutes a decisive step towards harmonized and transparent regulation, its long-term consequences could profoundly modify the role of Europe in a sector in full transformation. It remains to be seen whether this regulatory bet will be synonymous with stability or a strategic retreat in the face of more flexible competitors.

Luc Jose A.

A graduate of Sciences Po Toulouse and holder of a blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I took the commitment to raise awareness and inform the general public about this constantly evolving ecosystem. My goal is to enable everyone to better understand blockchain and seize the opportunities it offers. I strive every day to provide an objective analysis of current events, to decipher market trends, to relay the latest technological innovations and to put into perspective the economic and societal issues of this ongoing revolution.