The implementation of MiCA sees Tether’s market value plummet to its lowest point since the FTX crash.

Tether Faces Biggest Market Dip in Two Years as MiCA Regulations Take Effect

Tether’s market cap has dropped by over 1% this week, marking its most significant weekly decline since the collapse of the FTX exchange in November 2022. The popular dollar-pegged stablecoin, USDT, saw its market value decrease to $137.24 billion, down from a record high of $140.72 billion in mid-December. This drop comes in the wake of the EU’s enforcement of the Markets in Crypto-Assets (MiCA) regulations, which went fully into effect on December 30, 2023.

The MiCA regulations require issuers of stablecoins, like USDT, to obtain a MiCA license to offer or trade asset-referenced tokens (ARTs) or e-money tokens (EMTs) within the EU. USDT, being an EMT that is pegged to the U.S. dollar, falls under this new rule. While European traders are still allowed to hold USDT in non-custodial wallets, trading the coin on MiCA-compliant exchanges is no longer permitted. This regulatory shift has contributed to the recent drop in Tether’s market cap.

Despite this, industry observers suggest that the impact on Tether’s dominance and the broader crypto market may be limited. Karen Tang, Head of APAC Partnerships at Orderly Network, a decentralized liquidity provider, shared her views on social media, suggesting that the EU’s restrictions on USDT won’t harm the stablecoin’s global market position. “The EU isn’t the largest crypto market,” Tang wrote. “Most trading activity happens in Asia and the U.S. The MiCA delisting will primarily stunt innovation in the EU, where overregulation has already slowed progress.”

Crypto analyst Bitblaze echoed these sentiments, noting that 80% of USDT’s trading volume originates from Asia. “With such a large share of trading happening in Asia, the EU delisting won’t have a substantial effect on USDT’s global dominance,” Bitblaze explained. “Tether’s position in the market remains strong.”

In a bid to ensure its operations remain compliant with European regulations, Tether has also made strategic investments in MiCA-compliant companies such as StablR and Quantoz Payments. These investments are part of its effort to maintain its presence in Europe and align with evolving regulations.

While the MiCA implementation may temporarily impact USDT’s availability on EU-based exchanges, its global role in the cryptocurrency market continues to be unaffected. Tether’s proactive steps to align with new regulations help secure its long-term dominance in the industry.