Discourse: USDT Lacking Legality Under MiCA Due to Lack of Regulatory Provisions
The future of the USDT stablecoin on EU-regulated exchanges is uncertain, following the gradual delisting of USDT trading pairs for European users since the enforcement of the Markets in Crypto-Assets (MiCA) regulation, which began around 2024-2025.
In contrast to a simultaneous EU-wide delisting event, the process has been gradual, with major exchanges like Binance, Kraken, Crypto.com, and Coinbase progressively removing USDT for European users.
The MiCA regulation, designed to ensure investor protection and transparency, requires stablecoin issuers to maintain at least 60% of their reserves in EU-based banks, undergo regular audits, and prohibits offering yield on stablecoins within the EU. The USDT issuer, Tether, has strongly opposed these requirements due to increased systemic risk and operational constraints, choosing instead to exit the EU market rather than comply directly.
However, Tether has taken an indirect approach to serving EU users. By investing in a MiCA-compliant service provider (Bit2Me) with a regulatory passport in Spain, Tether can continue to offer USDT indirectly to EU users without the USDT issuer itself being MiCA authorized. This suggests that USDT may still be accessible via compliant intermediaries, but not through regular EU exchanges' USDT pairs.
The gradual delisting aligns with MiCA's stepwise enforcement phases over 2024-2026, as the EU aims to establish a comprehensive regulatory framework that aligns with standardized client protection measures by the end of the transition period.
It's important to note that European regulators have not officially mandated the delisting of USDT, and the transition period for MiCA's enforcement is 18 months. Some EU countries may allow existing businesses to continue operating under current legislation until January 1, 2026.
Tether CEO Paolo Ardoino has expressed concerns that MiCA poses a "systemic risk" to stablecoins and the banking system. Juan Ignacio Ibañez, a member of the MiCA Crypto Alliance's technical committee, has shared similar views, questioning whether all exchanges will simultaneously delist USDT, if it will happen gradually, or whether some companies will adopt a 'wait and see' approach.
As of December 27, many exchanges, including Binance, continue offering USDT services to EU clients without announcing plans to cease these operations. Ibañez noted that no regulator has explicitly stated that USDT does not meet requirements, but this doesn't mean the opposite either.
In November, Kraken and Tether jointly funded the launch of MiCA-compliant stablecoins, which could potentially offer an alternative to USDT within the EU. The key milestone is MiCA's effective date, which is December 30, marking the full implementation of the regulation in the EU.
The MiCA regulation's full effect in the EU leaves the future of the USDT stablecoin ambiguous, with the potential for continued indirect availability via compliant intermediaries, but a lack of certainty regarding direct trading on EU-regulated exchanges.
In light of the MiCA regulation's requirements, the business model of Tether, a significant player in the finance sector, has shifted towards investing in technology-based, MiCA-compliant service providers to continue offering USDT to European users indirectly. However, the gradual delisting of USDT trading pairs on major European exchanges raises questions about the future of USDT's direct business with these platforms.
