USDT is Europe's queen stablecoin, but that's about to change

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USDT Tether (USDT), the largest stablecoin on the market by trading volume, remains the king in Europe, a region where it continues to dominate the space even with growing competition. But that may change in the coming weeks. According to a report by market analysis firm Kaiko Research, USDT is clearly a “crucial trading asset” for European users. This, considering that in Europe, stablecoins have an almost 90% dominance in all cryptocurrency transactions. According to data from that analysis firm, the average weekly volume of dollar-based stablecoins in Europe, amounted to 270,000 million dollars, a figure 70 times higher than its euro-backed counterparts. However, the market share of euro-backed stablecoins has seen steady growth since 2020, currently reaching a historical maximum of 1.1%, according to data from that analysis firm. Now, USDT's hegemony is about to be challenged by impending regulation in Europe, recalls Kaiko Research. This even could lead to the elimination of USDT of the main European exchange platforms, as well as an increase in the adoption of regulated stablecoins backed by euros. It must be remembered that from June 30 the rules will come into force of the MiCA Law for stablecoins. This implies the application of a series of measures that distance USDT from the eurozone, as has been warned in the past by the issuing company of that digital asset. Paolo Ardoino, CEO of Tether Limited, recently warned that the risk of not having access to USDT in Europe “is already real.” This is because no agreement has been reached with European regulators and the MiCA regulations will be applied shortly. According to ArdoinoTether has actively participated in consultations on technical standards regulatory over the past few months “and remains concerned that MiCA contains several problematic requirements.” Among these requirements, for example, is the obligation for stablecoin issuers to register with the European authorities to obtain a license. Furthermore, these companies are required maintain 60% of reserves in bank deposits.

Something that Ardoino does not agree with, who predicts that USDT will leave the European Union before his refusal to give in to the demands of the bloc's authorities.

The departure of USDT has already begun to occur, remembering that Binance announced plans to restrict non-MiCA compliant stablecoins, including USDT. While Kraken, which is another important exchange in Europe, is actively studying whether to remove USDT of its offer for European users.

Only 1.1% of all transactions are made using euro-backed stablecoins, based on average weekly volume. Source: Kaiko Research.

Change in the stablecoin market in Europe

Either way, regulatory uncertainty, along with the problems Tether Limited has had in the past with regulators, could boost European traders. to opt for more regulated stablecoins, like USD Coin, which is issued by Circle. In fact, this is the stable cryptocurrency that has all the numbers at stake to continue operating after the MiCA regulations for stablecoins come into effect. This is because Circle You already have the license required by MiCA to operate and has become one of the companies in the cryptocurrency sector where regulatory compliance is most prevalent. In addition to other more regulated stablecoins, European users could switch from USDT and choose stable cryptocurrencies backed by euroswhich have experienced constant growth so far this year.

USDT clearly remains a crucial trading asset for European users, although that may be about to change. Source: Kaiko Research. These coins also could challenge USDT hegemony in Europe and become the new value reference in the cryptocurrency market on the old continent, according to Kaiko Research estimates. Cryptocurrency trading in Europe has been growing steadily, especially in euro-backed stablecoins. In fact, transactions using euro stablecoins have increased significantly since 2020. Exchanges such as Binance and Kraken have seen an increase in transaction volume in USDT vs EUR trading pairs, suggesting that European traders are increasingly interested in these stablecoins, as Kaiko analysts point out.