Could Uphold’s Tether Delisting Signal Trouble for USDT in Europe?

Popular New York-based crypto exchange Uphold has announced that it will delist six stablecoins, including the largest, Tether (USDT), in response to the European Union’s upcoming MiCA regulation.

The decision is in line with the Markets in Crypto Assets (MiCA) regulation, which will come into full effect on June 30, 2024. Passed into law in May 2023 and partially implemented a month later, MiCA requires all digital assets to comply with extensive regulations.

However, concerns have been raised about USDT’s future in the region.

How the MiCA Regime Will Impact Tether (USDT)

According to Elixir COO Tim Wang, the dominance of USDC and USDT on centralized exchanges could have a short-term impact of disrupting liquidity and trading markets.

In an exclusive statement CryptoPotatoThe Elixir executive said that unless the EU decides to completely end its involvement in promoting the cryptocurrency market, a medium-term solution will likely be needed.

Wang also noted that USD-backed stablecoins and assets remain the primary form of collateral in the crypto market, as euro-denominated stablecoins have barely caught on:

The EU’s new cryptocurrency law imposes strict regulations on fiat-backed stablecoins and e-money tokens that exceed certain adoption thresholds defined by seven quantitative and qualitative metrics. Under this system, oversight will be provided by the European Banking Authority rather than national authorities.

Key provisions of MiCA include 1:1 backing of fiat-based stablecoins with liquidity reserves, custodial segregation of reserve assets, and a ban on algorithmic stablecoins.

Uphold isn’t the only one with it. Collapsed They are under pressure. To ensure compliance and avoid regulatory issues, major cryptocurrency exchanges such as Kraken, Binance, and OKX have made certain changes to their stablecoin listing policies.

The future of stablecoins

The EU’s upcoming MiCA regulation could set a precedent that will influence cryptocurrency regulation in other jurisdictions, including the United States, but its provisions regarding stablecoins may not carry the same weight.

Unlike other regulatory frameworks that originated in Europe and were adopted in the U.S. (such as the GDPR which evolved into California’s CCPA), Wang believes stablecoin regulation will become more complicated as “stablecoin hegemony” becomes increasingly politically contentious, as epitomized by former President Donald Trump’s recent meeting with U.S.-based bitcoin miners to discuss the future of mining in the U.S.

“This is likely to be the same situation as with USD and other currency denominated stablecoins.”

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