This December 30 is an important date for the regulation of bitcoin (BTC): the second phase of the Regulation for the Cryptoasset Market (MiCA), the legislation aimed at market supervision in the European Union (EU), comes into force.
In this second phase, the regulations are aimed at supervising the operation of bitcoin exchanges, identified as cryptoasset service providers (PSAV). At the same time, on this same date closes the transitional period so that the market assimilates the rules for the issuance and circulation of stablecoins in the region, previously established in phase one.
These are facts with important implications for the market, starting with the new demands made on platforms to continue operating in the EU and the probable departure of stablecoins that do not comply with the rules, USDT standing out among them.
Regarding the repercussions, the cryptocurrency community still divided: Some support stricter regulations to stabilize the market, while others fear significant disruptions.
USDT status unclear
One of the effects of MiCA that is most concerning is the issue of stablecoins. Starting December 30, USDT, the largest stablecoin by market capitalization, could be removed from European exchanges due to non-compliance with the new regulations.
The deadline for compliance is this year-end. However, still uncertainty persists between market participants about the future of the Tether currency in Europe.
“No regulator has explicitly stated that USDT is non-compliant, but this does not mean that it is,” Juan Ignacio Ibañez, member of the MiCA Crypto Alliance Technical Committee, told the media. It is noted in this sense that while some platforms, such as Coinbase and OKX, have decided to remove USDT from their lists; others have not commented directly on the issue.
Amidst the doubts, there are those who assure that USDT will continue to be sold on many European exchanges despite MiCA. Prominent among them is Samson Mow, bitcoiner and CEO of JAN3.
Jacob Kinge, financial analyst and investor, drew attention to the fact that Tether has not issued new coins in more than two weeks. It warned that non-compliance could lead to a formal ban, disrupting liquidity and increasing transaction costs on European trading platforms.
These are comments that contradict each other and that, in the opinion of many, denote lack of clear directives from regulators. This fact is generating confusion among users, who are not certain about the commercialization of the stablecoin. Hence, many platforms have decided to take precautionary measures, which may possibly lead to to unequal market responses.
Other analysts believe that, whatever the result, there will be no significant changes. This, because the European stablecoin market is small in relation to the United States and Asia. Hence, the community is called upon not to create FUD regarding USDT.
It is understood, therefore, that although non-compliance with MiCA will not make USDT illegal, it does force exchanges operating within the EU to evaluate their risk and compliance situation.
Whatever the outcome with centralized platforms, it is certain that the Tether stablecoin will remain on the list of decentralized exchanges (DEX).
Additionally, in view of the controversy that has been unleashed, the fate of USDT could become a key indicator to evaluate the success of this regulatory transition and the credibility of European efforts to regulate a constantly evolving sector.
Fears grow over loss of privacy
MiCA comes with a series of new requirements for exchanges, which must now be registered in one of the bloc’s 27 countries to continue operating in the region. Otherwise, they run the risk of being sanctioned or expelled.
With the Regulation the so-called “travel rule” also comes into force through the new Fund Transfer Regulation (TFR). It consists of a group of recommendations proposed by the Financial Action Task Force (FATF) since 2019, as a way to counter money laundering and terrorist financing (AML/CFT).
As NoticiasVE explained, these rules will now be mandatory in the EU, following the guidelines of the European Banking Authority (EBA). This means that exchanges must store their customers’ data and track their movements with cryptocurrencies. They will have to share that information when the authorities require it, as long as the transactions exceed 1,000 euros.
The measure has been repeatedly questioned by the bitcoiner community, concerned about the impact of this regulation on the privacy of users. It is expected that cryptocurrency addresses will be tracked allowing the identification of the people involved in a transaction. For this reason, bitcoiners like Tuur Demeester invite people to resort to self-custody.
Companies could flee to the US
Due to the new demands that will be implemented with MiCA in the coming months, there are also those who predict an exodus of companies.
It is feared that many platforms will weigh the benefits of complying with MiCA against the potential advantages of move to a more cryptocurrency-friendly environment with laws.
A reaction that could be more evident in 2025, considering that many companies have not been able to make the adjustments required by the Law. A large number of countries even have delays in transposing their regulations.
This scenario raises questions about the long-term impact of the Regulation, as it is believed that these changes will cause a shock wave in the European cryptocurrency market, and some companies may consider move outside the EU.
This could be a deal breaker for companies, which are already feeling the weight of increasing regulatory burdens, notes a Financial Times report. The new compliance requirements could drive companies to the US, where more favorable regulations are expected under the Donald Trump administration.
The final phase of MiCA will impose stricter rules for token issuance and stricter licensing requirements. While these regulations aim to bring stability and legitimacy to Europe’s cryptoasset market, they can be restrictive for companies seeking greater flexibility.
Financial Times report.
“We are going to see a migration of cryptocurrency-related activities out of Europe in any form because things will be much easier in the United States,” shared Eswar Prasad, senior fellow at the Brookings Institution.
“In the previous US administration (with Joe Biden) MiCA certainly seemed like a good way to try to think about the cryptocurrency industry, without completely killing innovation,” Prasad added. But, after Trump’s victory he now thinks that MiCA will be seen like very strict.
In any case, what remains is to wait to see how the situation unfolds in 2025 and the market is reconfigured. There are also contrary voices that predict greater development and better opportunities for European cryptocurrency businesses and users.