MiCA Rollout Will Minimally Impact Tether, Claim Experts

Now that MiCA has taken effect in the European Union, crypto experts are divided on how this may impact Tether. USDT’s market cap dropped sharply, but fears of a Tether collapse may be overblown.

Several influential analysts, including Tether’s CEO, publicly said that this FUD may be an attempt to induce panic selling and, therefore, a cheap purchasing opportunity for more cynical investors.

Tether’s USDT Reacts to MiCA

Markets in Crypto Assets (MiCA) regulation has taken effect in the European Union, and the community is particularly anxious to see how it will impact Tether. When the deadline occurred on December 30, USDT’s market cap dropped by $2 billion.

In fact, this was USDT’s biggest drop since the FTX collapse, when the stablecoin dropped over 5% in the second week of November 2022. So, it wasn’t long before some users took this as a sign of the bear market. Influential analyst Michaël van de Poppe stated that “the market could be crashing.”

To be fair, MiCA has presented several difficulties for Tether, which focuses on stablecoins. Coinbase began restricting USDT in the middle of December, but the EU soon directed all exchanges to delist it.

Moreover, several competitors explicitly consider MiCA an opportunity to corner new market share. The market cap of Circle’s USDC, Tether’s biggest competitor, also surged by over $1 billion on deadline day. However, not everyone shares this bearish vision:

“There’s a lot of misinformation spreading about USDT being deemed illegal in the EU. First of all, it will not be illegal to hold USDT in the EU. [Second,] 80% of USDT’s trading volume comes from Asia, so the EU delisting won’t have any severe impact. This is evident from USDT’s market cap, which is down by only 1.2%,” claimed Axel Bitblaze.

Bitblaze then compared this MiCA panic to several other incidents with USDT and concluded that this FUD only creates a “buying opportunity” for savvier investors.

Tether’s CEO Paolo Ardoino concurred with this assessment, advising supporters: “don’t believe the FUD. Competitors are just desperate to make you believe things that don’t exist.”

Additionally, Tether has deliberately been preparing for MiCA to take effect. In November, the firm halted its EURT stablecoin, citing issues with future MiCA compliance.

However, it subsequently invested resources in other EU operations to maintain revenue streams for the foreseeable future. Tether invested in compliant stablecoins, to name one example.

“USDt is not the only stablecoin which is not offered to the public in the Union. There’s a lot of other stablecoins out there the issuers of which will not need to be authorised under MiCA – just because someone is not authorised in line with a specific law does not make them non-compliant with that law. If a hardline (and incorrect) approach is taken, only allowing CASPs to admit to trading stablecoins the issuers of which are authorised in line with MiCA, that would severely damage the liquidity of markets in the EU,” posted crypto lawyer Jonathan Galea, which was retweeted by Ardoino.

Essentially, MiCA will handcuff exchanges’ ability to offer stablecoins, but it won’t censure Tether itself. In all likelihood, the firm will never meet MiCA compliance, which would require USDT reserves to be held in EU banks.

Most importantly, the European market is not strong enough to necessitate drastic action like that, especially when Asia represents the bulk of USDT trade.