Tether’s USDT, the world’s leading dollar-pegged stablecoin, has seen the steepest weekly drop in its market value in two years, raising concerns about market volatility.
The USDT market capitalization fell more than 1% to $137.24 billion this week, the most significant drop since the FTX exchange crash in the second week of November 2022, TradingView data shows. In mid-December it reached a record of $140.72 billion.
The decline follows the decision by several European Union (EU)-based exchanges and Coinbase (COIN) to delist USDT due to compliance issues with EU Crypto Asset Markets (MiCA) regulations coming into full effect. on December 30, even though rules on stablecoins (cryptocurrencies whose value is pegged to a real-world asset like the dollar) came into effect six months ago.
The regulation requires issuers to have a MiCA license to publicly offer or trade asset-referenced tokens (ART) or electronic money tokens (EMT) within the block. An ART is a crypto asset that seeks to maintain a stable value by referencing another asset such as gold, crypto tokens, or a combination of both, including one or more official currencies. ERTs reference a single national currency, just as USDT does.
EU-based traders can still hold USDT in non-custodial wallets, but cannot trade it on MiCA-compliant centralized exchanges.
USDT is a gateway to the cryptocurrency market, and is widely used by investors to fund cryptocurrency spot purchases and derivatives trades. As such, the delistings and falling market value have sparked speculation about a broader cryptocurrency market crash on social media.
However, these concerns may be unfounded and the negative impact could, at best, be limited to the euro zone, said Karen Tang, head of APAC partnerships at Orderly Network, a permissionless Web3 liquidity layer, in a publication in X.
“Access to @Tether_to will be restricted in the EU due to MiCa regulation will not harm USDT dominance,” Tang wrote. “The EU is not the largest cryptocurrency market. Most of the cryptocurrency trading volume occurs in Asia and the US. All this will do is slow down already slow EU digital asset innovation due to excessive and complicated regulation. If I could short the EU, I would… ”
Crypto analyst Bitblaze said Asia accounts for the giant share of tether volume, downplaying the impact of MiCA-led delistings in Europe.
“USDT is the largest stablecoin, with a market capitalization of $138.5 billion and a daily trading volume of $44 billion. As of today, 80% of USDT’s trading volume comes from Asia, so so delisting from the EU will not have any serious impact. Bitblaze scored on X.
Tether has invested in MiCA-compliant companies StablR and Quantoz Payments in a bid to ensure regulatory alignment.
