USDT's Legality Under MiCA Questioned Due to Lack of Restrictions
In the rapidly evolving world of cryptocurrency, a significant shift is underway in the European Union (EU). Most major regulated exchanges in the region have delisted or heavily restricted Tether's USDT stablecoin as part of compliance with the Markets in Crypto-Assets (MiCA) regulation, which became effective by mid-2025.
The MiCA regulation imposes strict requirements on stablecoins, such as the need for authorization by an EU regulator and full backing by liquid reserves. Tether's USDT has not fulfilled these requirements, leading to its removal from trading pairs on exchanges like Binance, Kraken, Crypto.com, and Coinbase for European users.
However, not all players in the market are adhering to this trend immediately. Some exchanges and issuers are taking a "wait and see" approach or attempting to adapt within MiCA’s framework. For instance, Kraken and Crypto.com are launching their own MiCA-compliant stablecoins to replace non-compliant assets like USDT in the EU market.
Tether Inc., on the other hand, has chosen to exit the EU market entirely due to what its CEO, Paolo Ardoino, sees as overly restrictive and risky regulations. Ardoino has expressed concerns that MiCA poses a "systemic risk" to both stablecoins and the banking system, specifically pointing to the requirement for stablecoins to hold at least 60% of reserves in potentially "vulnerable" EU banks as a concern.
While regulated EU exchanges have delisted USDT, users can still hold and use it in self-custody wallets or decentralized finance (DeFi) outside of regulated platforms. Offshore exchanges may continue to list USDT but risk enforcement actions if they do not block European users. The overall liquidity for stablecoins in the EU is shifting toward alternatives like USD Coin (USDC), which is licensed and compliant under MiCA, and euro-backed stablecoins without such strict caps.
The situation reflects a broader trend of MiCA reshaping stablecoin availability in Europe, driving market share toward licensed and compliant alternatives. The future of USDT in the EU remains uncertain, with officials yet to issue clear directives on the matter. As of December 27, Binance and many other exchanges continue offering USDT services to EU clients without announcing plans to cease these operations.
During this transition period, existing businesses in the EU may continue operating under current legislation until January 1, 2026. Other exchanges may not be required to act as quickly as Coinbase in delisting USDT, according to Juan Ignacio Ibañez, a member of the MiCA Crypto Alliance's technical committee.
In November, Kraken and Tether jointly funded the launch of MiCA-compliant stablecoins. Ibañez questions whether all exchanges will simultaneously delist USDT, if it will happen gradually, or whether some companies will adopt a 'wait and see' approach, anticipating statements from regulators.
The key milestone is MiCA's effective date, which is December 30. The EU aims to establish a comprehensive regulatory framework by the end of the transition period, aligning with standardized client protection measures. The transition period for MiCA's enforcement in the EU is 18 months.
This news underscores the ongoing evolution of the cryptocurrency landscape in the EU, as regulators work to establish a robust and secure framework for digital assets.
- The MiCA regulation, which aims to establish a comprehensive regulatory framework for digital assets in the EU, imposes strict requirements on stablecoins like Tether's USDT, leading some businesses to launch MiCA-compliant stablecoins to replace non-compliant assets in the EU market.
- Businesses in the European Union are taking different approaches to adhere to the MiCA regulation. While most major regulated exchanges have delisted or restricted USDT, not all are adopting this trend immediately, with some taking a "wait and see" approach or attempting to adapt within MiCA’s framework.
