The EU MiCA legislation will come into effect on December 30! Tether may face a complete delisting from EU exchanges?

Source: Talking about Li and Talking about the Outside

Remember in an article earlier this year (January 3), we mentioned the EU's "Markets in Crypto-Assets Regulation" (MiCA), as shown in the image below.

According to the timeline, the regulatory rules for stablecoin issuers under MiCA took effect on June 30 and will be fully implemented on December 30. MiCA is the EU's first comprehensive regulatory framework for the crypto industry, particularly setting clear requirements for stablecoin regulation.

In this context of increasingly stringent compliance requirements, it is foreseeable that competition in the European stablecoin market will inevitably intensify. From previous news, it seems that some crypto companies have also made corresponding preparations. For example, unlicensed Tether is said to have invested in the Dutch company Quantoz and the European stablecoin provider StablR.

In addition, European countries also seem to be continuously advancing their regulatory steps regarding cryptocurrencies. For instance, the UK's FCA (Financial Conduct Authority) has expressed a desire to launch a comprehensive regulatory framework for cryptocurrencies by 2026 (the holding of crypto assets in the UK has grown by 4% over the past two years, with about 7 million adults holding crypto assets among the country's 68 million population). The German parliament also passed the "Digitalization of Financial Markets Act" this month (December 21), necessary for the full implementation of crypto MiCA.

Returning to Tether, according to reports from Bloomberg, in order to comply with MiCA regulations, several crypto exchanges within the EU have delisted Tether's USDT, because so far, although Tether has made some preparations, it has not obtained the corresponding formal licenses. Meanwhile, Tether's main competitor, Circle, has obtained such licenses and is currently the world's first stablecoin issuer compliant with MiCA. They have now issued USDC and EURC locally to European customers, effective from July 1.

Therefore, some friends might ask, if EU exchanges completely delist USDT, will USDT collapse like UST did back then?

Next, let's briefly discuss this question.

I remember that last year (2023), we published a detailed article on the development history of Tether (USDT) on our public account, but that article is no longer available. Friends interested in Tether's history can search for it on Google.

In fact, regarding the MiCA launched by the EU, the purpose of regulation is to better grasp the liquidity of cryptocurrencies and prevent criminal activities such as money laundering. We all know that cryptocurrencies like USDT are often used in such criminal activities. Moreover, for a long time, there have been ongoing doubts about USDT, including:

• Insufficient transparency and questionable security. For example, it has never undergone a real audit. Although in 2021, Tether collaborated with BDO to release an "audit report," it was not a formal audit.

• Centralization risks and potential legal risks.

However, issues of transparency and security have seemingly existed since the birth of USDT. These issues do not require too much concern from ordinary retail investors. As we mentioned in a previous article: at least from our perspective, this field will still be dominated by USDT trading in the next 3 to 5 years.

But we need to pay attention to the fact that, compared to the persistent issues of transparency and security, for stablecoins like USDT, the potential loss of liquidity is currently the most serious problem they may face. If USDT exits the EU market due to non-compliance with MiCA, it will inevitably lead to liquidity loss.

However, those who understand Tether's development history should also know that they have already experienced many strikes or fines from relevant institutions in the past, yet they remain the largest stablecoin in the crypto space, with a market capitalization of $138.57 billion. As shown in the image below.

Although they seem to be facing a new round of strikes from the EU now, many friends have been panic exchanging all their USDT for USDC in recent days, but I believe this concern is somewhat excessive.

To put it bluntly, Tether's current scale and status have essentially made it a "too big to fail" company. I believe that a regulation like MiCA from the EU cannot cause USDT to collapse. Consider how much capital (or reserves) from major players, institutions, and tier-one exchanges is involved. If USDT were to collapse this month solely due to this EU regulation, it would mean that the entire crypto industry could face collapse, which those bosses certainly do not want to see.

On the other hand, as we have already mentioned, Tether is also trying to bypass some regulations through investments. Therefore, in the short term, there is no need for panic. If you are still not at ease, you might consider splitting your stablecoin holdings into half USDT and half USDC.

In summary, in the face of the immense interests of the market and capital, sometimes, some regional regulations may not have a fatal impact on USDT in the short term. Currently, it seems that the only thing that could take down USDT is its gradual abandonment by liquidity, but this takes time. If this MiCA successfully leads to USDT's complete exit from the European market, it would merely accelerate that timeline (of course, we cannot rule out the possibility of USDT becoming fully compliant in the future).

From a longer-term perspective, comprehensive regulation of stablecoins is only a matter of time. For example, with Trump's potential return to power next year, the US may also introduce some legislation (or legal frameworks) regarding cryptocurrencies. For USDT, 2025 may pose greater challenges, but for the stablecoin industry, 2025 could become a new glorious year. Only with a clear legal framework for stablecoins can large-scale institutional (such as JPMorgan and other large institutions and traditional financial entities), corporate, and consumer interest and participation be attracted, which will have a huge impact.

The development of the stablecoin industry is not limited to the crypto field; it may also represent the continuation of the dollar's status in the future. Once stablecoins are fully pegged to fiat currencies (mainly referring to the dollar), the development of stablecoins will also mean an increase in global demand for the dollar, which will be a massive game.