USDT Market Capitalisation Declines Amid MiCA Implementation

On December 30, the EU’s MiCA regulation for digital assets came into effect. The market capitalisation of the leading stablecoin USDT declined from over $141 billion in mid-month to approximately $137.5 billion.

The new rules impose stringent requirements on stablecoin issuers, including licensing, reserve standards, and liquidity norms.

Agne Linge from WeFi commented to The Block that compliance with the regulation is economically burdensome for major companies in the sector, such as Tether, the diversified business behind USDT.

“The new EU law requires small stablecoin issuers to now hold 30% of their reserves in low-risk commercial banks within the EU, while for larger players like Tether, the threshold is set at 60% or more,” she said.

However, the expert does not anticipate significant financial consequences for the USDT issuer due to exiting the European Union. The company is expected to earn around $10 billion in profit by the end of the year, has substantial cash reserves, and diversifies its income through investments, Linge noted.

She also highlighted that most EU countries provide a transition period of six to 18 months to adapt to the new rules.

Amid regulatory uncertainty, some European crypto exchanges have taken precautionary measures. Coinbase Europe delisted USDT and five other stablecoins.

In contrast, competitors like Binance and Crypto.com have not ceased supporting the assets. Both platforms chose to observe the implementation of MiCA and await clarifications regarding the new rules.

Paybis’ Chief Revenue Officer Uldis Teraudkalns believes the law “will transform the EU crypto landscape with far-reaching consequences.” He suggested that the need to comply with the requirements will drive some companies out of the union, regardless of their size.

“The main beneficiaries could be jurisdictions close to the EU, such as the UK and Switzerland. This will depend on how their regulatory regimes develop,” Teraudkalns speculated.

In his view, MiCA brings several advantages to the industry, such as improved investor protection and reduced fraud risks. However, this is associated with increased costs for conducting crypto-related business. This could lead to consolidation and reduced competition, the expert acknowledged.

He assessed that the EU market remains attractive for industry companies, so internal migration to regions with a more lenient regulatory approach will occur.

Back in August, Tether CEO Paolo Ardoino criticised MiCA, noting that the law creates a “systemic risk” not only for stablecoins but also for the banking system itself.

In December, he supported the view that the regulation is a “huge gift” for traditional credit and financial institutions.