Tether will not comply with MiCA, what will happen to USDT in Europe?

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Key facts: Ardoino does not believe that MiCA offers the sector a welcoming regulatory framework. Although the company is talking to regulators, in the short term USDT will not be regulated in Europe. Tether, the issuing company of the USDT stablecoin, for now will not comply with the rules established in the Regulation for the Cryptoasset Market (known as MiCA), which will come into force next July in the European Union (EU). According to the statements of the company's CEO, Paolo Ardoino, still they have not taken any action so that Bitfinex and Tether-issued stablecoins conform to the new EU rules. Ardoino assures that the company is still discussing its concerns with the European regulator regarding the new legislation. He confesses, in that sense, that he is “quite pessimistic about the development of the cryptocurrency sector in Europe.” «I don't think MiCA can foster the emergence of a welcoming regulatory framework,» comments the executive. He adds that – in his opinion – the message that is sent with the regulation is that Europe does not want cryptocurrencies. In this way, it questions a regulation that qualifies as too restrictive and limitingespecially for retail investors.

First of all, I would like to make it clear that we are in favor of regulation in general. We are trying to obtain licenses more or less all over the world. But in my opinion, Europe is rushing to regulate at the risk of stifling innovation. Paolo Ardoino, CEO of Tether.

For Ardoino, the attitude of the European authorities is, to a certain extent, understandable, taking into account that the EU need to protect the euro. This, in a context in which dollar stablecoins dominate all markets, including the European. «That is why Europe has implemented very restrictive measures for stablecoins.»

Demands are very difficult to meet for Tether

The Tether CEO is referring to the rules established in MiCA, which not only require stablecoin issuers to register for a license from a regulator, but must comply with other standards. Among the demands is a capital limit and a 1:1 liquid reserve, in order to facilitate the smooth redemption of assets, at any time. On this topic, Ardoino also highlights the strong restrictions established around to the way of managing reservations.

At Tether, what particularly bothers us about this specific part of MiCA is that, if you are a small stablecoin issuer, 30% of your reserves must consist of cash deposits at a bank. In the case of systemically sized stablecoins like ours, this requirement rises to 60%! Paolo Ardoino, CEO of Tether.

The manager explains that the support of a stable currency They must be very flexible, in order to reimburse users who request it. «In 2022, we had to repay almost USD 7 billion in less than 48 hours. In one month, these refunds reached $20 billion, a quarter of our reserves,» he said. «This would have been impossible to achieve with a quota of deposits immobilized in banks», where also there is a risk of bankruptcy. Hence, Ardoino considers the purchase of financial securities better. In addition to the previous MiCA restrictions, cash deposits must be distributed in at least six banking entities. Something complicated in a context in which very few banks accept this type of business in Europe. It's already very difficult to get just one! said Ardoino. In this way, given the difficulties that arise for Tether to comply with the regulations, USDT is expected to no longer be regulated in the EU in the short term. This, “while we continue the dialogue with EU regulators,” according to the CEO of Tether. Meanwhile, cryptocurrency exchanges operating in the region are expected to eliminate USDT trading. A measure that has already been advanced by platforms like OKX and that will soon Binance will implement. As BitcoinDynamic reported, the entry into force of MiCA will probably generate a significant drop in transaction flow with USDT and other dollar-backed stablecoins, in European markets. A measure that the EU is betting on, waiting for trade with euro stablecoins to increase.