EU’s MiCA Licenses for Crypto Firms Raise Questions About Tether’s USDT Stability and Market Impact

• MoonPay, BitStaete, ZBD, and Hidden Road recently received MiCA licenses from the Dutch Authority, paving the way for EU-wide crypto operations.

• The Malta Financial Services Authority (MFSA) has also granted a license to blockchain-based sports and entertainment platform Socios.com.

• Tether’s USDT market cap fell by $2 billion amidst MiCA implementation, prompting concerns, though analysts suggest USDT will remain resilient in the EU.

Learn about the recent MiCA licenses issued to multiple crypto firms and their implications for the EU crypto landscape in this insightful article.

More Crypto Companies are Lining up for MiCA License

The Markets in Crypto-Assets (MiCA) framework, effective from December 30, outlines a standardized regulatory approach for crypto firms across the EU. A Crypto Asset Service Provider (CASP) license issued by any EU member state enables companies to expand their operations throughout the bloc.

Among the first international companies to secure this license, MoonPay joined by BitStaete, ZBD, and Hidden Road, signifies a crucial step in widespread regulatory compliance.

Other EU countries are working diligently to implement MiCA regulations ahead of the official deadline. Malta has been proactive, recently approving Socios.com, a fan engagement platform, to operate as a regulated provider of virtual financial assets.

Chiliz commented, “Socios.com has secured full regulatory approval from Malta Financial Services Authority (MFSA). The MFSA’s approval is for a class 3 Virtual Financial Assets Act (VFAA) licence to provide Virtual Financial Asset (VFA) services. Malta’s well-established regulatory framework is already significantly aligned with MiCA regulation.”

In parallel, the UK’s regulatory landscape continues to evolve, with the FCA expected to finalize its crypto regulations by 2026, focusing heavily on stablecoins.

Moreover, Lithuania has positioned itself as an attractive destination for crypto firms seeking MiCA compliance, as companies like Bitget expand their operations within the country while simultaneously pursuing regulatory approvals in 15 countries.

A Critical Roadblock for Tether

The introduction of MiCA has sparked significant discussions regarding its potential impact on stablecoins, particularly Tether’s USDT. In November, Coinbase announced it would limit USDT transactions in the EU, leading other exchanges to consider similar restrictions.

Since the implementation of MiCA, USDT’s market capitalization has dipped by $2 billion, raising alarms about potential vulnerabilities in the stablecoin’s future.

However, analysts have largely dispelled fears of a systemic collapse, arguing that USDT’s substantial liquidity primarily lies outside the EU. “Most of Tether’s liquidity originates outside the region. With an average daily trading volume of $44 billion, Tether’s operations remain largely insulated from potential regional disruptions,” noted Agne Linge, head of growth at WeFi.

Despite these setbacks, USDT remains legally usable on P2P platforms, decentralized exchanges, and in custodial wallets, allowing for continued trading activities. In preparing for MiCA, Tether needs to remain vigilant, halting its euro-denominated stablecoin (EURT) and refocusing efforts on the Asian market, where USDT trading predominates.

As MiCA adoption progresses across various jurisdictions, the long-term ramifications for the cryptocurrency industry, particularly around stablecoins and cross-border operations, will continue to unfold.

Conclusion

The evolving landscape of cryptocurrency regulation in the EU, particularly through the implementation of the MiCA framework, is set to reshape how crypto firms operate, paving the way for enhanced compliance across borders. The resilience of major players like Tether, amidst challenges, suggests a complex but dynamic future for crypto markets within regulatory frameworks.