The European Union’s impending regulatory framework for digital assets, Markets in Crypto-Assets (MiCA), is casting a shadow over the dominance of Tether (USDT), according to Bloomberg. Major crypto exchange Kraken is actively reviewing its support for USDT in the EU, hinting at a potential delisting if compliance becomes too cumbersome.
This news comes as European regulators finalize the technical guidance for MiCA, expected to be fully implemented by early 2025. The framework, specifically targeting stablecoins, will impose stricter requirements on issuers like Tether.
Under MiCA, stablecoin issuers aiming to operate within the bloc will need to acquire a license from a national financial authority by June 30th, 2024. Additionally, they’ll face scrutiny on corporate governance, conflict of interest, and reserve management. Notably, a minimum of one-third of all funds must be held at an independent credit institution.
These regulations have industry experts like Marcus Hughes, Kraken’s global head of regulatory strategy, wary. Hughes anticipates a “cut off” point where many currently offered stablecoins will no longer be compliant. The ability to offer these coins will likely hinge on proper registration under the EU’s e-money regime.
Kraken Prepares for All “Eventualities”
While Tether has expressed confidence in maintaining its role as an “on-ramp off-ramp solution” for European customers, its lack of plans for medium-term MiCA compliance raises concerns. This stance contrasts with OKX, another major exchange, which has already limited USDT functionality for EU users in anticipation of MiCA.
Kraken, meanwhile, is actively exploring its options and preparing for “all eventualities,” including the potential delisting of USDT. The exchange is also in the final stages of selecting its post-MiCA European headquarters, with France and Ireland emerging as frontrunners.
The regulatory landscape for stablecoins in the EU is undoubtedly shifting significantly. While, the full impact of MiCA, remains to be seen, one thing is clear: the free rein currently enjoyed by many stablecoins, including Tether, is likely coming to an end. Only those issuers willing to adapt and comply with stricter regulations will be able to continue serving European users.
This development presents both challenges and opportunities for crypto exchanges like Kraken. Navigating the evolving regulatory environment will be crucial, but for those who succeed, there’s the potential to solidify their position as leaders in the compliant and transparent crypto market of the future.
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