Is MiCA the End of USDT in Europe? The Truth About MiCA’s New Regulatory Challenges

• MiCA enforces strict regulations for CASPs, including compliance with the travel rule and mandatory European registration.
• USDT faces uncertainty in Europe due to MiCA standards, potentially disrupting liquidity and increasing transactional costs.

On December 30, the Markets in Crypto-Assets Regulation (MiCA) will implement its second phase, introducing comprehensive oversight of crypto-asset service providers (CASPs). These measures aim to enhance transparency and compliance across the region, directly affecting platforms and assets, including stablecoins such as USDT.

Stablecoins Under Scrutiny: Uncertainty Surrounds USDT

A key concern under MiCA is the compliance of stablecoins, with USDT at the forefront. As the world’s largest stablecoin by market capitalization, its future in Europe remains unclear.

Some platforms, including Coinbase and OKX, have already delisted USDT, citing uncertainties in meeting MiCA’s stringent standards. Conversely, other exchanges maintain the asset, contributing to inconsistent market responses.

Juan Ignacio Ibañez of the MiCA Crypto Alliance highlights the lack of explicit regulatory statements regarding USDT’s status.

“No regulator has declared USDT non-compliant, but that doesn’t guarantee its compliance,” he explained. 

Analysts, such as Jacob Kinge, suggest that non-compliance could lead to a formal ban, impacting liquidity and raising transaction costs across European platforms. Meanwhile, Tether’s halt on new USDT issuances for over two weeks has further fueled speculation.

Compliance Challenges and the Travel Rule

In addition to stablecoin regulations, MiCA enforces new obligations for exchanges. Platforms must now register within one of the 27 EU member states to operate, or face penalties.

The “travel rule,” derived from Financial Action Task Force (FATF) recommendations, also takes effect. This rule requires detailed tracking of fund transfers to prevent money laundering and terrorist financing. 

While aimed at ensuring security, critics argue it infringes on privacy and imposes costly administrative burdens.

Potential Migration of Crypto Businesses

Continuing ETHNews reports on MiCA , the regulatory shift has sparked discussions about a potential exodus of crypto businesses from Europe. Companies are weighing the compliance costs of MiCA against relocating to regions with more favorable regulations, such as the United States. Eswar Prasad of the Brookings Institution predicts increased migration, stating:

 “Crypto activities may shift outside Europe because the U.S. offers a more flexible framework.”

Reports indicate that some nations within the EU have lagged in transposing MiCA’s rules, exacerbating compliance difficulties.