Tether's EU Future: Can USDT Weather the MiCA Storm, and What Should Crypto Businesses Do?

Update, October 2026: in January 2025, ESMA expected providers to restrict services that help clients acquire stablecoins that do not comply with MiCA, such as USDT, by the end of January 2025, where those services amounted to an offer to the public or admission to trading. A sell-only wind-down was allowed until the end of March 2025, and ESMA said mere custody and transfer should remain possible. ESMA went further in an opinion of 8 October 2026: MiCA-authorised providers should stop all services involving non-compliant stablecoins for EU clients, including custody and transfers. Existing holdings are to be wound down within three months, with only limited services such as withdrawal or conversion allowed in the meantime. Coinbase gave EEA retail customers until 30 October 2026 to withdraw USDT and other affected stablecoins, after which remaining balances are converted into USDC or another supported asset. Kraken also no longer offers USDT to EEA clients. Circle’s French entity is authorised as an e-money institution and issues USDC and EURC in the EU under MiCA.

The introduction of MiCA has cast a long shadow over Tether's USDT in the EU, raising concerns about its future. Will USDT weather the storm? This article was first published in November 2024. The update above summarises what has happened since.

What is MiCA?

The EU's Markets in Crypto-Assets regulation, also known as MiCA [1], is European landmark regulation set to reshape the cryptocurrency landscape, aiming to balance Web3 innovation with consumer protection, market integrity, and financial stability.

In terms of stablecoins, MiCA establishes a comprehensive framework for stablecoins offered in the EEA. It determines specific and rather rigorous requirements that stablecoins’ issuers must meet if they want to serve the EEA market. MiCA recognises two primary types of stablecoins:

• E-money tokens: these are pegged to a single official currency and function similarly to electronic money; and
• Asset-referenced tokens: these aim to keep a stable value by referencing another value or right, or a combination of them, such as currencies, commodities or other crypto assets.

Why is Everyone Talking About Stablecoins?

Although MiCA will impact the entire crypto ecosystem, stablecoins like USDT are particularly in focus due to increased economical and other risks. MiCA’s stringent rules were expected to alter the stablecoin market dramatically.

USD Tether, a stablecoin, falls under the EU’s MiCA regulation as an e-money token. Issuers of e-money tokens must be authorised as credit or electronic money institutions (EMIs) in the EU. For instance, Circle, Tether’s closest competitor, has already secured the first MiCA-compliant EMI licence from the Autorité de Contrôle Prudentiel et de Résolution (ACPR), the French banking regulatory authority. Circle announced that the approval allows both its USDC and EURC tokens to be issued in the EU in compliance with MiCA's stablecoin regulations [2].

The MiCA stablecoin regime became effective on June 30, 2024, and the rest of the regulation has applied since December 30, 2024. At the time, Tether, the issuer of USDT, was not authorised in the EU as a credit institution or e-money institution, so USDT could not be offered in the EU as a MiCA-compliant e-money token.

In response, OKX became the first major cryptocurrency exchange to discontinue support for USDT, phasing out all USDT trading pairs in the EU. At the time, other major exchanges, such as Binance and Kraken, had not yet delisted USDT. They restricted it in early 2025: Kraken moved USDT to “sell-only” mode for EEA clients and converted remaining holdings to another stablecoin by 31 March 2025, and Binance removed USDT spot trading pairs for EEA users on the same date. Since the end of MiCA’s transitional period on 1 July 2026, major regulated platforms, including Coinbase, Kraken and Binance, no longer offer USDT trading to EEA clients. Holding USDT in self-custody remains legal, but you should check each provider’s current position, withdrawal arrangements and deadlines.

Does an Old VASP Registration Still Help?

No longer. In preparation for MiCA, many crypto businesses obtained national VASP registrations, and MiCA let crypto-asset service providers (CASPs) that were legally operating before 30 December 2024 continue until 1 July 2026 at the latest, or until their MiCA application was decided. Those transitional periods have now ended in every member state, so an old VASP registration no longer allows a provider to continue in-scope services without MiCA authorisation.

The lack of authorisation as a credit or electronic money institution prevents Tether from making their stablecoins available on the EEA market. But does this automatically call for an immediate ban or USDT delisting by compliant crypto businesses? While one of MiCA's primary goals is consumer protection, an abrupt removal of USDT could negatively impact crypto users. It’s important to understand that an immediate delisting and ban of USDT would send shockwaves through the crypto market, as USDT is by far the largest stablecoin, with a market cap of around $120 billion at the time [3].

Therefore, ensuring a smooth transition is not just beneficial for businesses, but also in the best interests of the government agencies and users.

Can USDT Survive the Regulatory Storm?

The future of USDT, the world’s largest stablecoin, hangs in the balance as it grapples with stringent new regulations. It seems that, in contrast to Circle, Tether faces increased scrutiny regarding transparency, capital adequacy, liquidity, and operational resilience.

In the end of the day, MiCA does pose significant hurdles for stablecoins’ issuers, requiring them to maintain a 1:1 reserve ratio in liquid assets held with a third party. For example, USDC reserves are held in bank deposits, short-dated US Treasuries and overnight Treasury repurchase agreements, and Circle publishes monthly independent attestations of those reserves. MiCA gives e-money token holders a right to redeem at par, although that is not a guarantee against every operational or insolvency risk. Conversely, USDT is backed by a combination of cash, cash equivalents, and other assets. However, unlike USDC, USDT has faced inquiries and scepticism concerning the transparency and sufficiency of its reserves. Despite third-party attestations, Tether lacks comprehensive audits, a recurring criticism.

MiCA also requires e-money token issuers to keep at least 30% of the funds received as deposits with credit institutions. For significant tokens, the minimum rises to 60%, as specified in EBA technical standards made under MiCA. Those standards also limit how much of the reserve can be placed with any single bank, but significant exposure to the banking sector remains. Deposit guarantee schemes are national, with a standard limit of €100,000 per depositor per bank, and whether they cover an issuer’s reserve accounts should not be assumed. For instance, the collapse of Silicon Valley Bank resulted in a de-peg event for Circle’s USDC [4].

Furthermore, MiCA restricts the further issuance of e-money tokens denominated in a currency that is not an official currency of an EU Member State, such as the US dollar, where they are widely used as a means of exchange. The issuer must stop issuing the token if, within a single currency area in the EU, the estimated quarterly averages of transactions counted as uses of the token as a means of exchange exceed both 1 million transactions per day and €200 million in aggregate daily value. This is not a cap on worldwide trading volume: MiCA and the applicable technical standards determine which transactions count. The issuer that crosses the threshold must also submit a plan to bring usage back down.

Adapting to MiCA: Options Available to Crypto Businesses Using USDT:

If your business provides crypto-asset services in the EEA, whether offering custody or administration of crypto assets on behalf of others, running an exchange, etc., you should carefully reconsider making USDT available to EU residents. The decision hinges on various factors, but the most critical is your risk tolerance:

• Delisting. The most secure and straightforward option would be to simply delist USDT until it becomes MiCA-compliant. If you are a non-EU business, then you may delist USDT only for your European users. Several cryptocurrency exchanges, such as OKX and Uphold, have already employed this approach, setting a dangerous precedent for USDT.

For EU-oriented businesses, the path forward is clear: review your current service scope and each relevant platform’s restrictions before offering USDT-related services, and support a smooth transition by considering strategic partnerships with compliant stablecoin issuers, implementing automated conversion features, offering incentives or rewards for users who convert their USDT holdings to compliant stablecoins, creating educational materials to help users understand the differences between USDT and MiCA-compliant stablecoins, as well as the regulatory landscape, etc.

[1] - Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937

[2] - Circle is First Global Stablecoin Issuer to Comply with MiCA, EU’s Landmark Crypto Law

[3] - According to the market data available at https://coinmarketcap.com/currencies/tether as of October 3, 2024

[4] - Stablecoin USDC breaks dollar peg after revealing $3.3 billion Silicon Valley Bank exposure