- Tether recently confirmed that the company has no plans to comply with MiCA.
- Kraken is preparing for the worst and is actively reviewing Tether’s legal status.
- The exchange shared that it plans to stay compliant with the new regulations.
Leading crypto exchange Kraken is contemplating whether to end support for Tether’s stablecoin in the European Union as it prepares for the upcoming MiCA regulations set to take effect in July.
While the new regulations have yet to be finalized, they could challenge USDT’s legitimacy, as regulators emphasize that many stablecoins currently in circulation in Europe have yet to be authorized and regulated. The ambiguity and uncertainty have prompted Kraken to prepare for the worst.
Kraken Prepares For the Worst
“We’re absolutely planning for all eventualities, including situations where it’s just not tenable to list specific tokens such as USDT,” Marcus Hughes, Kraken’s global head of regulatory strategy, told Bloomberg in an interview, sharing that the exchange was bracing for the impact of the upcoming MiCA regulations.
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Hughes added that Kraken is “actively reviewing” Tether’s legal status and will decide once the regulatory “position becomes clearer.”
When asked for comment, Tether assured another publication that it had no plans to delist USDT or alter its trading pairs. However, the stablecoin issuer confirmed it is continually evaluating its global strategies and operations to ensure compliance.
Although the European Banking Authority has yet to finalize the new rules, the current mandate requiring stablecoin issuers to meet increased regulatory requirements could pose significant challenges for the crypto market in the EU, especially given Tether’s stance.
Tether’s Roadblock
Tether’s CEO Paolo Ardoino recently confirmed that the company has no plans to comply with MiCA regulations in the medium term, expressing concerns about the potential risks and impacts of the new rules.
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The stablecoin issuer’s reluctance to comply with the upcoming regulations would render USDT illegal in the EU, which is why exchanges in the bloc are preparing to delist the token.
Ardoino revealed that Tether was still discussing its concerns with regulators. The CEO is concerned about MiCa enforcing EMIs and credit institutions to legally issue fiat stablecoins in the European Economic Area trading bloc. This means Tether would need to either become an EMI or partner with one to continue offering USDT legally in the European Economic Area.
“That would pose severe risks to stablecoins regulated in the EU,” Ardoino shared on social media, urging regulators to learn from incidents like the collapse of Silicon Valley Bank and its impact on a major US stablecoin. “If a bank goes bankrupt, uninsured cash goes into bankruptcy,” he added.
Ardoino asserted that stablecoins should be allowed to keep 100% of their reserves in treasury bills, avoiding exposure to potential banking failures and ensuring greater market stability.
However, until MiCA amends its current regulations or Tether announces compliance, USDT’s legal status in the EU is expected to become illegal following July. Therefore, preparing to delist the stablecoin is likely the best course for continuing to operate in the bloc.
On the Flipside
- Due to USDT’s lack of interest in complying with the new MiCA rules, OKX has already removed support for the stablecoin in the EU.
- MiCA is still being finalized and is expected to be fully implemented by 2025.
- USDT issuer Circle is also relocating its operations from the EU to the US.
Why This Matters
Tether’s reluctance to comply with the new MiCA regulations could pose a significant barrier for exchanges and platforms in the EU bloc. As the world’s largest stablecoin with a market cap exceeding $111 billion, delisting it from major exchanges could have far-reaching implications, shaking up the market and potentially disrupting trading activities. This move could force EU users to seek alternative stablecoins that comply with regulations, potentially leading to a shift in liquidity and trading patterns within the crypto market.
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