Tether Exit Puts Europe at Disadvantage amid Donald Trump’s Crypto Push

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As an analyst with over a decade of experience in the financial sector, I find myself cautiously optimistic about the MiCA regulations in the European Union. While I understand the need for regulatory oversight to combat illicit activities, the sudden delisting of Tether’s USDT stablecoin could potentially put Europe at a disadvantage in terms of liquidity and market volatility.

The strict regulations for Cryptocurrency Assets (MiCA) in the European Union are set to be fully implemented towards the end of this year, which may place the continent at a competitive disadvantage, particularly when President-elect Donald Trump, who has expressed support for cryptocurrencies, assumes office next month in January.

Due to the upcoming MiCA regulations, several European cryptocurrency platforms have removed Tether’s USDT stablecoin from their offerings. This decision has led to a growing trend among crypto investors in Europe to utilize the Euro for trading digital assets, as they seek alternative methods for buying and selling them. Meanwhile, new investors are trying to take advantage of this situation by stepping into the vacated positions.

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:

While I can see the reasoning behind it, I find that it’s rather exclusive and restrictive for European users, as USDT is, without doubt, the most fluid stablecoin on a global scale.

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.

As a researcher, I’ve observed some apprehension among regulators regarding this growth. In fact, just last month, UK authorities announced they had dismantled Russian financial networks transferring billions of dollars, allegedly linked to oligarchs, criminal groups, and intelligence personnel. Notably, the National Crime Agency reported that these operations were using Tether (USDT).

MiCA Faces Challenges in Illicit Stablecoin Activity Tracking

To enhance supervision over stablecoins, the European Union’s MiCA crypto regulations require that any stablecoins traded on centralized platforms must originate from entities holding an e-money license. These issuers are then obligated to secure two-thirds of their stablecoin reserves in a bank independent of them, and they must also keep tabs on all transactions carried out for payment purposes.

In contrast, Circle, the primary rival of Tether and the issuer of USDC stablecoin, obtained an e-money license in July. Meanwhile, Tether has not pursued this license, leaving its reason unexplained. As a result, European crypto exchanges will be compelled to remove Tether from their platforms by December 30th, if they haven’t already done so.

Yet, instead of relying on its current approach, Tether is exploring an alternative means to maintain its footing within the European market. Recently, the company made an investment in European stablecoin issuer StablR, which has already achieved the necessary compliance with the MiCA regulations.

Although the MiCA regulatory framework is in place, experts caution that local authorities may require substantial enhancements to their monitoring systems to efficiently detect and prevent illegal transactions. Isabella Chase, a senior advisor at blockchain analytics firm TRM Labs, underscores the importance of robust surveillance tools over the MiCA regulations themselves for effective tracking.

Europe Can Fall Behind America in Crypto Race

Amidst increasing regulatory scrutiny in the cryptocurrency sector, there’s a swift transformation underway. With Donald Trump at the helm, the industry anticipates a potential shift in regulatory guidelines, leaning towards a more accommodating stance.

The Trump administration has chosen several champions of digital assets to fill important roles, with Howard Lutnick, CEO of Cantor Fitzgerald LP, being nominated to lead the Department of Commerce. Notably, Lutnick’s company holds approximately $85 billion worth of Tether’s Treasury bills in safekeeping.

Contrarily, Europe could find itself lagging in the competitive crypto sphere, as evidence of slow progress appears within the region. Forecasts predict venture capital investment in European cryptocurrency startups will hit a four-year minimum by 2024. Nevertheless, there are promising signs, for instance, a report from the European Central Bank (ECB) demonstrates that crypto holdings in the eurozone have more than doubled since 2022, reaching approximately 9%.

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2024-12-20 18:55