MiCA Comes Into Force: Impact on the USDT and the EU Crypto Landscape. AddUp experts view.
MiCA, the EU’s first regulation for the cryptocurrency market, came into effect on 30 December 2024. It sets clear requirements for companies that issue and manage cryptocurrencies, including stablecoins.
According to the MiCA, stablecoins are divided into:
- Asset-referenced tokens (ART) are backed by mixed assets such as currencies and commodities.
- Electronic money tokens (EMT): they refer their value to a single cryptocurrency. Algorithmic stablecoins are also included in this category. However, they do not rely on any real-world asset for backing, which is why MiCA imposes an outright ban on them.
Stablecoin issuers must secure a license to operate within the EU. To achieve this, the following steps are required:
- Be registered as an e-money institution or a credit institution.
- Publish a white paper.
- Hold liquid reserves with a third-party custodian to back 1:1 all issued coins or tokens.
- Regular reporting of the value and composition of reserves.
- Hold at least 30% of their reserves in low-risk commercial banks within the European Union.
Companies without a license won’t face an immediate ban though. Each Member State will decide whether to enforce new regulations right away or allow crypto assets service providers a transitional period of up to 18 months to operate without a MiCA license. In some cases, crypto services can continue without a license until July 1, 2026.
However, this transitional period varies by country. For instance, it lasts 18 months in France but only 6 months in the Netherlands (the complete list can be found here). For stablecoin issuers, the transitional period ends in June 2025. This inconsistency adds uncertainty to how the new regulations will be applied.
Who Has the License?
On July 1, 2024, stablecoin issuer Circle revealed that its France-based division had secured an Electronic Money Institution (EMI) license. This authorization enables the company to issue USDC and EURC stablecoins in full compliance across the European Union (EU).
However, not all stablecoin issuers have hurried to license their activities. Among such companies are Pax Dollar (PAX), PayPal USD (PYUSD), Gemini Dollar (GUSD), GMO Trust’s GYEN, DAI from the MakerDAO protocol, and Tether (USDT). The latter has the highest market capitalization (137,4 bln, which makes up over 66% of the stablecoin market) compared to other stablecoins, so its incompliance with MiCA raises most questions.
Experts argue that for major stablecoin issuers like Tether, the requirement to hold at least 30% of their reserves in EU banks may prove economically unfeasible. However, non-compliance could result in a ban within the EU, potentially causing significant disruptions across the crypto ecosystem.
Will Tether Get a License?
Regulators are not yet clear on what will happen with stablecoins whose issuers have no license. While they do not declare USDT illegal, they also do not say it is legal to work with it in EU territory.
Meanwhile, Tether CEO Paolo Ardoino expressed strong criticism of the new requirements in his post on X, where he says the following:
“MiCA is nothing but a massive gift to the traditional banking system. Forcing stablecoin issuers to hold >30% of their liquidity in banks only ensures more profits for the legacy players. It’s regulation designed to benefit the old system, not innovation.”
Even though Tether’s leaders criticize MiCA, the company is not completely unwilling to ignore the legislation. So, Tether has already announced that its Euro-pegged stablecoins will be discontinued, and all holders can redeem them until November 25, 2025. However, the further developments for Tether and its future in the EU remain unclear.
To Buy or Not to Buy?
While crypto issuers are thinking about legalizing their statuses in the EU, investors and users have the main question unanswered:
Is holding, buying, and selling restricted stablecoins such as Tether legal?
Experts in crypto investing claim that, yes, it is legal for individuals to perform any activities with USDT and other restricted stablecoins. MiCA governs the operations of businesses rather than individual users. As a result, individual investors and users can still buy and sell USDT and other restricted stablecoins for Euros, provided platforms offer this trading pair. However, ESMA has the authority to impose restrictions on platforms, potentially prohibiting them from trading USDT and other restricted stablecoins.
What Cryptocurrency Exchanges Support USDT?
At present, some crypto exchanges, such as Coinbase, have removed USDT and other restricted stablecoins from their offerings for EU citizens, while other platforms have chosen a different approach.
- Binance imposed some restrictions on buying and selling USDT with Euro, but it permits trading USDT on a peer-to-peer exchange.
- KuCoin, OKX, and Bitget allow to buy and sell USDT with EUR.
- Bybit allows all operations with USDT without any limitations for now.
It is highly likely that, over time, the number of platforms allowing users to buy and sell USDT and other restricted stablecoins for EUR will decrease.
What’s Further?
USDT’s possible failure to meet MiCA requirements holds significant implications for the global stablecoin market and can reshape global preferences for stablecoins.
The global market is constantly evolving, and changes may arise after the publication of this article. This is why the relevance of the information may shift. We recommend staying informed on the latest regulatory developments, particularly those affecting the EU.
We hope that you found our article useful and clarified some of your concerns. We will keep you updated and inform you on important crypto trading news.
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AddUp Team.
