MiCA’s enforcement has caused Tether’s market value to fall sharply, reaching its largest dip since the FTX crash.

Tether Experiences Largest Market Drop Since FTX Collapse as MiCA Regulations Impact EU Trading

Tether’s market capitalization has fallen by more than 1% this week, marking its steepest decline since the FTX debacle in November 2022. The world’s leading dollar-pegged stablecoin, USDT, saw its market value shrink to $137.24 billion, down from its record high of $140.72 billion in mid-December. The decline follows the full enforcement of the European Union’s Markets in Crypto-Assets (MiCA) regulations, which took effect on December 30, 2023.

The MiCA regulations now require issuers of stablecoins, including USDT, to secure a MiCA license to offer or trade asset-referenced tokens (ARTs) and e-money tokens (EMTs) within the EU. USDT, as an EMT tied to the U.S. dollar, is directly impacted by this rule. While EU-based traders can still hold USDT in non-custodial wallets, they can no longer trade it on exchanges that comply with MiCA regulations. This shift has contributed to the recent fall in Tether’s market cap.

Despite the uncertainty surrounding USDT’s accessibility in the EU, experts believe its global position remains strong. Karen Tang, head of APAC partnerships at Orderly Network, a Web3 liquidity protocol, reassured the crypto community on social media, stating that the EU’s role in the crypto market is smaller compared to regions like Asia and the U.S. “Most of the trading volume happens in Asia and the U.S.,” Tang noted. “The MiCA delisting may hinder innovation in the EU, but it won’t harm USDT’s dominance in the global market.”

Crypto analyst Bitblaze also downplayed the potential impact of the EU delisting, emphasizing that 80% of USDT’s trading volume originates from Asia. “With such a large share of volume coming from Asia, the EU delisting is unlikely to have a significant impact on Tether’s global market share,” Bitblaze explained.

In light of the MiCA regulations, Tether has made efforts to align itself with the new rules. The company has invested in MiCA-compliant firms such as StablR and Quantoz Payments, ensuring its ability to operate within the EU while adhering to regulatory requirements.

While the MiCA regulations may restrict USDT’s availability on certain exchanges in the EU, Tether’s position as the dominant stablecoin remains largely unaffected. Its global influence and market leadership continue to make USDT a key player in the cryptocurrency space.