Key Notes
- The delisting of Tether’s USDT stablecoin might also lower Europe’s appeal to global investors due to reduced liquidity.
- As a result, Europe poses the risk of losing the crypto race to America as President-elect Donald Trump is pushing for friendlier regulations.
- Despite MiCA’s efforts to regulate stablecoins, experts warn that effective monitoring of illicit activities will depend on enhanced surveillance tools instead of regulations.
Markets in Crypto Assets (MiCA), the crypto regulations in the European Union, will go into full force by the end of the year which could potentially put the continent at a disadvantage especially when pro-crypto President-elect Donald Trump resumes office next month in January.
In preparation for the MiCA regulations to kick in, several European crypto exchanges have delisted Tether’s USDT stablecoin
USDT
$1.00
24h volatility:
0.0%
Market cap:
$139.75 B
Vol. 24h:
$94.68 B
. As a result, crypto investors in Europe are increasingly turning to the Euro to swap in and out of digital assets while new investors are attempting to fill the gap.
The goal behind introducing the MiCA crypto regulations is to provide regulators with better visibility into crypto flows while combating illicit activities like money laundering. However crypto industry leaders warn that introducing MiCA will reduce market volatility without meeting the desired objectives. This would also potentially diminish the bloc’s appeal to global investors for setting up a base in Europe. Usman Ahmad, chief executive officer of crypto trading firm Zodia Markets Holdings Ltd said:
“I understand why it’s been done to a certain extent, but it’s quite exclusionary and quite limiting for EU clients themselves because [USDT] is the most liquid stablecoin by a country mile”.
The stablecoin market has been growing at a rapid pace amid rising demand from new investors. Previous reports suggested that the market will grow to multi-trillion dollars in size by 2030.
However, some regulators have shared concerns over this growth. Earlier this month, UK police reported shutting down Russian networks transferring billions of dollars on behalf of oligarchs, street gangs, and spies. According to the National Crime Agency, these networks were utilizing USDT.
MiCA Faces Challenges in Illicit Stablecoin Activity Tracking
With efforts to tighten oversight on stablecoins, the EU’s MiCA crypto regulations mandate that all stablecoins listed on centralized exchanges should be issued by entities having an e-money license. These issuers then have to back up two-thirds of their stablecoin reserves with an independent bank and should also monitor all transactions conducted for payment purposes.
However, Tether’s major competitor Circle, issuers of USDC stablecoin
USDC
$1.00
24h volatility:
0.0%
Market cap:
$42.88 B
Vol. 24h:
$4.99 B
, secured the e-money license in July. On the other hand, Tether has yet not pursued this license for reasons unknown. Without this license, European crypto exchanges will have to mandatorily delist Tether by December 30.
However, Tether is finding another route to have its presence continued in the European market. Earlier this week, the firm invested in European stablecoin issuer StablR which has already secured the necessary MiCA compliance.
Despite MiCA’s regulatory framework, experts warn that local authorities will need significant upgrades to their surveillance tools to effectively track and prevent illicit transactions. Isabella Chase, a senior policy adviser at blockchain analytics firm TRM Labs, emphasized that effective monitoring relies more on surveillance tools than on MiCA itself.
Europe Can Fall Behind America in Crypto Race
As regulatory pressures mount in the crypto industry, the landscape is shifting rapidly. Under the leadership of Donald Trump, the crypto industry is expecting to see a change in regulatory policies with a more friendlier approach.
Trump’s administration has appointed several advocates for digital assets to key positions, including Howard Lutnick, CEO of Cantor Fitzgerald LP, who has been nominated to oversee the Department of Commerce. Lutnick’s firm is responsible for custodying Tether’s $85 billion in Treasury bills.
On the other hand, Europe risks falling behind in the crypto race, with signs of stagnation emerging in the region. Venture capital investment in European crypto startups is projected to reach a four-year low in 2024. However, there are some positive indicators, such as a report from the European Central Bank (ECB) revealing that crypto ownership in the euro area has more than doubled since 2022, reaching 9%.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
