USDT could be delisted from European exchanges by June 2024
Tether (USDT) Could Face Delisting From European Exchanges Amid Impending MiCA Regulation
MiCA Regulation and its impact on Tether (USDT)
The MiCA regulation is a comprehensive legal framework designed to regulate crypto-asset markets and services within the European Economic Area (EEA). It introduces stringent licensing requirements for crypto-asset service providers (CASPs), issuers of asset-referenced tokens (ARTs), and issuers of electronic money tokens (EMTs).
MiCA also provides detailed regulatory obligations to protect consumers and ensure financial stability. It prohibits market manipulation and insider dealing and clarifies the powers and sanctions available to competent authorities. Under this regulation, crypto-asset services can only be provided by authorized legal entities with established offices in the EU.
Within the MiCA framework, Tether is classified as an EMT. As such, it must adhere to specific criteria for EMT issuers. EMT issuers are required to obtain authorization as either electronic money institutions or credit institutions. This authorization process involves demonstrating operational efficiency, financial robustness, and adherence to MiCA’s regulatory frameworks to the appropriate national authority in the EU.
However, given USDT’s market cap and user base, it could be classified as a significant e-money token, subjecting it to stricter requirements due to its potential impact on financial stability. For Tether to continue operating in the EU, it must navigate a complex legal and regulatory pathway.
OKX, one of the largest global crypto exchanges, has made a pre-emptive move by delisting all USDT trading pairs. While EU users can still deposit, withdraw, buy, sell, and convert USDT via over-the-counter (OTC) trading, they can no longer trade USDT against other cryptos on OKX.
OKX’s decision could be a bellwether for the broader changes in the EU’s crypto landscape. Other exchanges may opt to delist or restrict stablecoins that do not comply with MiCA in anticipation of regulatory scrutiny or to align with the new legal framework.
Limitations for Stablecoins in the EU and how USDT might comply with MiCA
Being authorized as a significant EMT issuer allows the entity to handle larger volumes of transactions before triggering regulatory actions, such as halting further issuance. However, for stablecoins denominated in a non-EU currency, MiCA will impose restrictions. These restrictions trigger when transactions in a single currency exceed certain limits. Upon surpassing these limits, issuers must cease issuance and devise strategies to diminish their crypto asset’s usage.
OKX’s decision to halt USDT trading pairs highlights the regulatory challenges that exchanges face. With MiCA soon coming into effect, it is only logical to begin placing focus on EUR-based/denominated stablecoins. However, it would be a stretch to think that stablecoins tied to the Euro will quickly reach or surpass the trading volumes of their USD-pegged counterparts.
For Tether to comply with MiCA regulations, it must analyze the definitions of “transactions” and “means of exchange.” The EBA’s November 2023 consultation will be crucial to gaining insights into these definitions. Despite possible exemptions, Tether may still exceed these limits, affecting its legality in the EU.
Recently, Tether has begun changing its compliance process. It has started setting up partnerships with EU regulatory entities and third-party audit firms to provide proof and composition of its reserves. This could be a step towards achieving compliance with MiCA.
A Potential Domino Effect?
Currently, OKX remains the only major exchange to have removed USDT pairs in Europe. This may have been a pre-emptive strike from OKX before MiCA stablecoin regulations came into place this year. While it’s worth noting that you can still use USDT on OKX, it is just limited in functionality.
The reaction of the market to MiCA’s implementation could lead to increased adoption of alternative stablecoins. However, the market dynamics and the established dominance of USD-referencing stablecoins make such a significant shift unlikely in the immediate future.
The impending MiCA regulation marks a significant shift in the EU’s approach to crypto-asset governance. Notably, the regulation’s stringent requirements for stablecoins like USDT could lead to significant changes in the EU’s crypto market. Whether Tether will comply with these new regulations or face delisting from European exchanges remains to be seen.
While OKX’s decision to delist USDT may be a harbinger of broader changes in the EU’s crypto landscape, it is too early to predict the full impact of these changes. Regardless, MiCA’s implementation will undoubtedly shape the future of the crypto market in the EU and potentially influence global standards for stablecoin regulation.
