Tether threatened with withdrawal in the EU: what impact for crypto traders in Europe?

Tether now appears to be affected by regulatory adjustments in Europe. Indeed, with the entry into force of the new MiCA regulations on the EU crypto-asset markets expected by the end of the year, the cryptocurrency landscape is changing.

Aiming to strengthen supervision and eliminate illegal practices, the MiCA regulations require that stablecoins traded on centralized platforms be issued by companies with an e-money license. Faced with these new requirements, several cryptocurrency platforms operating in the EU have chosen to delist the world's leading stablecoin, USDT from Tether.

This decision fuels concerns about liquidity and attractiveness for investors due to this withdrawal.

Tether Withdrawn: Consequences For European Crypto Markets

USDT, as a stablecoin, plays a central role in the crypto ecosystem as it serves as an essential tool for trading and settling cryptocurrency transactions.

Removing access to Tether continent-wide could have unintended effects, pushing traders away from high-visibility areas or toward illiquid trading pairs.

Usman Ahmad, CEO of Zodia Markets, highlighted the significant impact of the move, calling it “exclusionary and disruptive” for EU-based clients. Usman said:

I understand why this was done to some extent, but it is very exclusionary and restrictive for EU customers themselves, because [le USDT] is by far the most liquid stablecoin.

It should be noted that the removal of Tether from European platforms has already led to changes in trading habits. According to Bloomberg, with USDT trading pairs dwindling, some platforms are reporting a rise in fiat trading pairs as traders adapt.

Erald Ghoos, CEO of OKX Europe, observed that fiat currencies are increasingly being used for trading in the absence of Tether, reflecting changing market dynamics.

Is Europe Behind in the Crypto Race?

Although the aim of MiCA is to strengthen regulatory standards, some critics believe it could actually harm the EU's competitiveness as a crypto hub. Pascal St-Jean, CEO of crypto asset manager 3iQ Corp, said:

A large portion of cryptoassets are traded in pairs with Tether's USDT. Thus, the cost to investors of having to trade an asset included in a USDT pair just to purchase the same asset traded for another stablecoin is likely to cause disruption.

Bloomberg reports that these restrictions come as other regions, notably North America, are seeing a flurry of cryptocurrency activity. PitchBook data indicates that venture capital investment in European crypto startups is expected to hit a four-year low in 2024, compounding concerns in the region.

On the other hand, the United States seems to be changing course culturally towards a more open approach to cryptocurrencies. President-elect Donald Trump's administration has appointed several cryptocurrency advocates to key positions, signaling a potential less restrictive approach to regulation.

Featured image created with DALL-E, chart from TradingView

Good to know

• The MiCA regulation is expected to bring greater transparency to the crypto-asset market in Europe.
• There are growing concerns about the liquidity of cryptocurrency markets following the delisting of some stablecoins.
• The cryptocurrency investment landscape could vary significantly from region to region, depending on local regulations.