Doing business with the European Union can be cumbersome to say the least, but why are they going after crypto's flagship stablecoin, Tether ($USDT) and what is the future of USDT in Europe? It's no surprise that stablecoin issuer Tether attracts regulatory attention due its market dominance, and some analysts have even raised concerns over the possibility of an FTX-like liquidity crisis on the horizon. So what gives, Tether?
First, let's start things off with what Tether is, and why it is important to crypto...
Tether (USDT) is a stablecoin pegged to the US dollar at a 1:1 ratio and is widely used for crypto trading and cross-border payments. Tether provides investors with a low-volatility digital asset while retaining the fast and borderless nature of cryptocurrencies. Imagine off-ramping your investments, if you're looking for somewhere safe to convert these assets into a currency that lacks volatility and won't lose it's value over time - Tether is oftentimes your best bet. Traders can benefit from using these stablecoins in a variety of ways, oftentimes seeking safe areas to temporarily place profits while looking for their next trades or even yield farming. Tether is specifically used to reduce volatility in investor portfolios but can also used as a popular payment method as well. Migrants can even send money back home to their families conveniently with stablecoins, as countries find more demand in accepting capital via stablecoins than compared to holding US dollars in fiat. Additionally there are a few more reasons why sending stablecoins can be beneficial:
- Governments cannot control their money
- Easier to transfer capital across borders
- Banks are difficult to deal with and can oftentimes can several days to settle
Despite all of its utility, Tether has faced numerous controversies over the years, including fines and allegations of reserve mismanagement. These issues have fueled ongoing debates about its long-term viability.
Now back to our story, Tether seems to have found itself at the center of a regulatory storm being driven by EU's Markets in Crypto Assets (MiCA). MiCA, or The Markets in Crypto Assets (MiCA) is a regulation that requires stablecoin issuers to meet certain pre-requisites, such as obtaining an e-money license. Tether has not met these requirements.
Tether's EU ban ultimately stems from the MiCA regulation mentioned above, which introduces strict requirements for stablecoin issuers including:
- Licensing as electronic money institutions
- Maintaining reserve in recognized banks
- Providing transparency and regular audits of reserves
Here are some fun facts about Tether you might not already know...
1). Tether is the worlds largest cryptocurrency with a market capitalization of over $114 billion as of August 2024. It's the largest stablecoin in the world, with 70% of the market share. As of January 2025, Tether's market cap was recorded at $138.447 billion.
2). Back in 2021, the United States CFTC fined Tether a whopping $41M civil penalty for lying that they fully backed the USDT stablecoins with reserves. A drop in the bucket for Tether...
3). To this date (01/23/25), Tether's stablecoin reserves have never been officially audited by a 3rd party organization. Tether's CEO, Paolo Ardoino even explained that the Big Four accounting firms (Deloitte, PwC, EY, KPMG) are hesitant to audit Tether due to reputation risks, despite it being a top priority for the company.
Across every major cryptocurrency exchange, USDT is the most traded cryptocurrency against Bitcoin, Ethereum, Solana, Cardano - you name it. This means that when speculators buy or sell their digital assets for dollars, they’re typically converting these assets into Tether’s $USDT. Tether's lack of transparency regarding its reserve backing and its operational compliance can be a huge red flag, and should certainly raise concern for those worried of an impending collapse should a scenario happen similar to FTX. At this point, it seems obvious that something shady is going on with Tether based on their refusal to "play ball" with regulators and a handful of crypto exchanges have taken notice. A few of these organizations include some of the largest exchanges in the crypto space such as; Coinbase, Binance Crypto.com, etc.
Coinbase:
As of December 14th, 2024 Coinbase Delists USDT in Europe, in a more proactive approach citing regulatory concerns ahead of the MiCA enforcement.
Binance and Crypto.com:
While Coinbase has chosen a side, Binance and Crpyto.com continue to list USDT for its European users and are awaiting clear guidance from regulators before taking a stance.
Is Tether too big to fail? Only time will tell. Some believe this to be true, stating that large centralized entities can present risks to broader cryptocurrency space, whose foundation lies upon the promotion of transparency, security and user autonomy. What do you think?