Regulation
Could Uphold’s Tether delisting pose a problem for USDT in Europe?
A popular New York-based cryptocurrency exchange, Uphold, has announced the delisting of six stablecoins in response to the upcoming MiCA regulation in the European Union, including Tether (USDT), the largest of the group.
This decision is in line with the Markets in Crypto Assets (MiCA) Regulation, which will come into full force on June 30, 2024. Passed into law in May 2023 and partially promulgated a month later, MiCA requires all digital assets to comply with its extensive regulations.
However, this raises concerns about the future of USDT in the region.
Implications of the MiCA regime on Tether (USDT)
According to Tim Wang, COO of Elixir, the short-term effects could lead to a dislocation of the liquidity market and exchange markets due to the dominance of USDC and USDT on centralized exchanges.
In an exclusive statement to CryptoPotato, the Elixir executive said that a medium-term solution would likely be needed, unless the EU decides that it no longer wants to be involved in facilitating cryptocurrency markets altogether.
Wang also noted that stablecoins and US dollar-backed assets are still the primary form of collateral in cryptocurrency markets, as European stablecoins have failed to gain much adoption.
New EU crypto laws impose strict rules on stablecoins and fiat-backed e-money tokens that exceed a specific adoption threshold defined by seven quantitative and qualitative indicators. This system entrusts supervision to the European Banking Authority instead of national authorities.
Key provisions of MiCA include 1:1 support of fiat-based stablecoins with liquid reserves, custodian separation of reserve assets, and a ban on algorithmic stablecoins.
Uphold isn’t the only one to have surrendered under pressure. In an effort to ensure compliance and avoid regulatory issues, several major cryptocurrency exchanges such as Kraken, Binance, and OKX have made some changes to their stablecoin listing policies.
Stablecoin hegemony at stake
While the next MiCA regulations in the EU could set a precedent that would influence cryptocurrency regulations in other regions, including the United States, provisions for stablecoins may not be as important.
Unlike other regulatory frameworks that originated in Europe and have been adopted in the US, such as GDPR evolving into CCPA in California, Wang believes stablecoin regulation will be more complex as “stablecoin hegemony” becomes increasingly a controversial political topic, exemplified by former President Donald Trump’s recent meetings with US-based Bitcoin miners to discuss future mining in the country.
“This can easily become the same case for the US dollar versus other currency-denominated stablecoins.”