Bloomberg News reported on Dec. 20 that the EU's impending cryptocurrency regulation has disrupted the market as exchanges prepare to comply with new requirements under the Markets in Cryptocurrency (MiCA) framework. There are growing concerns that liquidity could be disrupted.
The regulation, which is scheduled to take full effect on December 30, requires Tether's USDT, the world's most widely used stablecoin, to be delisted from EU-regulated platforms.
MiCA aims to strengthen transparency and deter illicit financial activity by requiring stablecoin issuers to secure e-money licenses, maintain large reserves, and supervise payment-related transactions. Masu.
However, Tether Limited has not yet obtained such a license, which means it will be excluded from crypto exchanges operating within the EU.
Liquidity challenges are at hand
USDT plays a dominant role in cryptocurrency trading pairs and is the basis of global liquidity. The absence of stablecoins in the EU market is expected to disrupt trading activity and increase costs for investors who rely on stablecoins to efficiently move funds.
3iQ Corp CEO Pascal Saint-Jean said:
“The majority of crypto assets are traded against USDT on Tether. Forcing investors to switch to other stablecoins or fiat currencies creates inefficiencies and increases transaction costs.”
Exchanges such as OKX, which delisted USDT in Europe earlier this year, have reported a shift to fiat trading pairs among users. Despite these adaptations, market participants remain concerned about reduced liquidity and the potential for fragmentation of trading activity.
The EU's strict regulatory stance comes at a time when President-elect Donald Trump's pro-cryptocurrency policies have boosted the market and increased optimism in the United States.
While MiCA is designed to increase transparency and curb illegal activity, critics say it risks pushing traders and liquidity providers into less restrictive jurisdictions. Analysts have warned that Europe's regulatory efforts could undermine competitiveness in the global cryptocurrency market.
mixed signal
Despite the challenges, the European Central Bank recently reported that crypto ownership in the euro area has doubled since 2022, with 9% of the population now owning digital assets.
However, venture capital investment in European crypto startups has declined, reaching its lowest level in four years. The trend highlights broader concerns about the region's ability to attract innovation and investment under a stricter regulatory framework.
While this regulation is aimed at increasing market stability and transparency, the immediate impact on liquidity and investor confidence will be a major blow to the block's ability to remain competitive in a rapidly evolving digital asset ecosystem. may try.
mentioned in this article
