USDT Market Cap Drops After MiCA Rules Take Effect in EU
The market cap of stablecoin USDT has recorded its sharpest decline in the past two years after the MiCA regulations in the EU came into effect on December 30, 2024.
Over the past week, the market cap of the world's largest stablecoin USDT has dropped by more than $3 billion from its record high of $140.72 billion to $137.24 billion, marking the largest decline since the FTX collapse in November 2022.
The main reason for this decline in market cap is mainly due to USDT being delisted from many exchanges in the EU, including Coinbase, to comply with new regulations from the Markets in Crypto-Assets (MiCA) law, which officially took effect on December 31, 2024.
Specifically, MiCA requires stablecoin issuers to obtain a license if they want to offer or trade tokens pegged to real assets in the EU region. This results in EU users only being able to store USDT in Web3 wallets but not being able to trade on MiCA-compliant centralized exchanges, making it difficult for European users to access and use this stablecoin.
The delisting of USDT in the EU due to MiCA regulations, causing a sharp decline in capitalization, has raised concerns about the possibility of the next "black swan" in the crypto market. However, if assessed comprehensively, the impact of MiCA on USDT seems to be limited to the EU region and does not significantly impact the global position of this stablecoin.
According to Karen Tang, Director of APAC Partnerships at Orderly Network, Europe is not the largest center of the crypto market:
"The MiCA regulation may slow down the development of digital assets in the EU but will not significantly affect the dominance of USDT. The majority of crypto trading volume, about 80%, comes from Asia and the US."
Access to @Tether_to set to be restricted in the EU due to MiCa regulation isn’t going to harm #USDT dominance. EU isn’t the largest #cryptomarket. Most crypto trading volume occurs in Asia and US. All this will do is stunt the EU’s digital assets innovation, which is already…
— Karen Tang (@KarenxTang) December 27, 2024
Agreeing with this view, crypto analyst Bitblaze also emphasized that 80% of USDT’s daily trading volume comes from the Asian region. This comment shows that USDT will still maintain its leading position in the global crypto market despite being delisted in the EU.
In contrast to this optimistic view, Jacob King said that the sharp decline in USDT's capitalization will raise concerns as the previous USDT burn coincided with a more than 55% plunge in the crypto market. Predictions that Bitcoin will "bloodbath" in the near future quickly spread, causing many people to panic.
However, Tether CEO only responded with the "🤡" icon, expressing a sarcastic attitude and downplaying these negative predictions, sarcastically saying that these concerns are just a baseless "farce". At the same time, he implicitly affirmed his confidence in Tether's stability as he had previously stated.
🤡
— Paolo Ardoino 🤖🍐 (@paoloardoino) December 31, 2024
In addition, Tether has also prepared in advance by investing in MiCA-compliant companies such as StablR to maintain Tether's presence in the European market, ensuring that users in the EU can still access stablecoins provided by Tether.
Despite the decline in Tether's market capitalization, USDT still maintains its position as the largest stablecoin in the crypto market and the third-largest token in the industry, reaching $137.2 billion. This figure far exceeds its direct competitor USDC, which has a market capitalization of only $43.72 billion, less than a third of USDT's.
