Tether's Market Cap Sheds $3 Billion as Europe’s MiCA Regulations Take Effect

Tether’s (USDT) market cap dropped by around 1.4% in the past week, coinciding with the full implementation of the European Union's Markets in Crypto-Assets (MiCA) regulations on Dec. 30.

The market capitalization of USDT, which accounts for nearly 68% of global stablecoin trading volume, fell from nearly $140 billion on Dec. 26 to $137 billion as of this morning. This marks the sharpest decline in USDT’s market cap since the FTX crash in Nov. 2022, when it fell around 6% from $69 billion to $65 billion, according to CoinGecko data.

The dip comes as European exchanges grapple with delisting USDT in response to the new MiCA regulations, which aim to provide unified oversight for the crypto industry. While MiCA’s rollout underscores the EU’s push for transparency, it also highlights broader challenges facing the crypto industry as regulations evolve.

Experts say the uncertainty surrounding USDT’s future in Europe could limit its accessibility and create instability for users who rely on it.

“MiCA imposes a range of strict requirements on stablecoin issuers, including, but not limited to, mandatory licensing and transparency standards,” Vijay Pravin, the Founder and CEO of bitsCrunch, told the Defiant. “Tether's reported non-compliance with MiCA is concerning from an optics point of view and may undercut Tether’s dominance and influence in the stablecoin sector.”

Pravin also pointed out that the recent upswing in the crypto market has likely prompted investors holding USDT to re-deploy their assets into other cryptocurrencies, anticipating a potential market rally with the upcoming US inauguration.

Kevin Murcko, founder and CEO of digital asset platform CoinMetro, echoed Pravin’s sentiment that the decline is likely linked to MiCA’s implementation. However, he noted that the decline could also be closely tied to the widespread FUD (fear, uncertainty, and doubt) spread through social media, particularly on X.

“A long list of self-titled crypto influencers were pushing stories in the lead up to Dec. 30th about the imminent delisting of USDT across all EU platforms and how it would become illegal to hold it as an EU-based trader,” Murcko said. “Both of these stances are false – clickbait and fear-mongering seem to have gotten the best of the market for now.”

MiCA Rollout

MiCA was introduced in June 2023 with the goal of creating a unified legal framework for the 27 EU member states. It requires crypto service providers to obtain authorization from national regulators and adhere to strict transparency standards.

The regulation also mandates stablecoin issuers to maintain adequate reserves and meet stability and reliability requirements. Failure to comply could result in the removal of stablecoins and other crypto tokens from European exchanges. In mid-December, Coinbase preemptively delisted USDT due to compliance concerns.