Tether (USDT) Market Cap Drops 1.2% as EU Digital Asset Regulations Take Effect

Tether's U.S. dollar stablecoin (USDT) lost approximately 1.2% of its market cap this week as EU digital asset regulations took full effect on Dec. 30.

Tether’s U.S. dollar stablecoin witnessed its biggest downturn this week as European Union digital asset regulations took full effect on Dec. 30, causing a slight decrease in USDT’s market cap.

On-chain data showed that USDT lost around 1.2% of its market cap, which fell to $137 billion from December’s peak of $140 billion. The token’s market cap surged throughout 2024 despite experiencing a downturn in December.

Concerns arose that USDT’s operator might exit the European Union now that new laws have been enacted. However, social media sentiment was countered by industry leaders and observers who pointed to data affirming USDT’s resilience outside the EU.

Nothing burger

Experts and analysts dismissed rumors that the EU’s Markets in Crypto-Assets Regulation would disrupt USDT’s business. Karen Tang, Orderly Network’s head of APAC partnerships, and social media analyst Axel Bitblaze, pointed to data showing that Asian and U.S. markets maintain USDT’s dominance.

About 80% of USDT’s trading volume occurs in Asia, according to Bitblaze. Tang argued that MiCA regulations are more likely to hinder the EU itself, slowing digital asset growth due to “convoluted overregulation.”

4/But Axel, what about USDT trading volume and the depeg?USDT is the largest stablecoin, with a market cap of $138.5B and a daily trading volume of $44BAs of today, 80% of USDT's trading volume comes from Asia, so the EU delisting won't have any severe impact. pic.twitter.com/NjxB2iVLhe

Tether plots MiCA compliance

Speculation about USDT’s future in the EU intensified in late 2024 after Coinbase and several EU-based exchanges delisted USDT, citing MiCA compliance concerns. While stablecoin rules took effect in July, the full MiCA framework came into force at the end of the year.

MiCA requires stablecoin operators to hold certain licenses for e-money tokens and trading asset-referenced tokens, like USDT. So far, Circle (USDC) is the first and only major stablecoin issuer to obtain a MiCA license.

Tether invested in EU-based companies such as StablR and Quantoz to prepare for regulatory inclusion. CEO Paolo Ardoino has reiterated that the company has no intention of abandoning the EU. While USDT cannot currently be traded on MiCA-compliant exchanges, traders can still store the stablecoin in non-custodial wallets as an interim solution.