All You Need to Know About MiCA Regulation in EU Markets and the USDT Ban Controversy

The European Union braces for an important change regarding the crypto industry – MiCA regulations’ entry into application. The MiCA framework is aimed at regulating digital assets while enhancing market transparency.

There have been a lot of controversies regarding what will happen to crypto exchanges in Europe and some of them target the fate of Tether’s stablecoin USDT in the region.

Here are the key aspects of the new MiCA regulation in the EU.

What is the MiCA Framework?

The official website of the European Securities and Markets Authority (ESMA) explains the key points of the new MiCA regulations implemented in Europe’s markets. ESMA is an agency of the European Union located in Paris that replaced the Committee of European Securities Regulators on January 1, 2011.

According to the official ESMA website, the Markets in Crypto-Assets Regulation (MiCA) institutes uniform EU market rules for crypto-assets. The new regulation covers crypto-assets that are not currently regulated by existing financial service legislation.

Key Provisions and Rules – How MiCA Affects Users

Key provisions are set for entities issuing and trading crypto assets (including asset-reference tokens and e-money tokens) and they cover the following transaction issues:

Transparency
Disclosure
Authorization
Supervision

In more detail, the new rules cover the following, according to EUR-Lex, an official website of the EU:

Transparency and disclosure requirements for issuing/public offering/crypto admission to a trading platform
Authorization and supervision of crypto providers and issuers of asset-referenced and e-money tokens
Operation, organization, and governance of the issuers and crypto asset service providers
Protection of crypto asset holders and clients of service providers
Measures to prevent insider dealing, unlawful disclosures of inside information, and market manipulation

The new legal framework aims to support market integrity and financial stability by:

Regulating public offers of crypto-assets
Ensuring consumers are better informed about their associated risks

Explanation of Terms

The MiCA regulation distinguishes three types of crypto assets, according to EUR-Lex:

Asset-referenced tokens – These are crypto assets that stabilize their value in relation to other assets/baskets of assets.
E-money tokens – These are crypto assets that stabilize their value in relation to a single official currency.
Crypto assets other than the ones mentioned above.

Offerors (persons seeking admission to trading crypto assets other than e-money tokens and asset-referenced tokens) must:

Be a legal person
Publish a crypto asset Whitepaper and marketing communication on their website
Act honestly, fairly, and professionally
Communicate with actual and potential asset holders in a fair, clear, and non-misleading manner
Identify, prevent, manage, and disclose any conflicts of interest
Be liable for damages for incorrect information in the Whitepaper
Provide holders of crypto-assets with a right of withdrawal

Issuers of asset-referenced tokens must

Be a legal person or a certain undertaking based in the EU
Have authorization from their home EU member state or be a credit institution that produces and crypto asset Whitepaper approved by competent national authorities
Redeem their asset-referenced tokens at any time upon holder request at the market value of the referenced assets by delivering the assets
Publish a crypto asset Whitepaper and marketing communication on their website and be liable for damages for incorrect data
Act honestly, fairly, and professionally
Communicate with actual and potential token holders in a fair, clear, and non-misleading way
Act in the best interests of the holders of the tokens and treat them equally
Establish and maintain effective and transparent procedures for handling complains
Identify, prevent, manage, and disclose any conflicts of interest
Maintain a reserve of assets covering liabilities toward token holders and have own funds at least equal to: 350,000 EUROs, 2% of the average amount of the reserve assets, a quarter of the fixed overheads of the preceding year
Establish recovery and redemption plans for use if they are unable to meet their obligations

Issuers of e-money tokens must:

Be authorized as a credit or e-money institution
Publish a crypto asset Whitepaper and marketing communication on their website and be liable for any damages for incorrect data
Comply with the issuance, redeemability, and marketing rules
Issue the tokens as a part value on receipt of funds
Redeem upon a holder’s request the tokens at any moment and at par value
Invest the funds they receive in secure, low-risk assets in the same currency and deposit them in a separate account in a credit institution
Establish recovery and redemption plans if they are unable to meet obligations

MiCA Timeline

In June 2023, the MiCA rules were published in The Official Journal of the European Union (OJEU). The OJEU gazette of records for the EU published in 23 languages.

December 2024 marked the month of MiCA’s entry into application in the EU, according to the official timeline published on the official ESMA website.

ESMA - MiCA implementation timeline — ESMA – MiCA implementation timeline

During the transitional phase, in parallel to the drafting of technical standards, ESMA worked with the national competent authorities (NCAs) on a convergent approach to authorizations of crypto-assets service providers (CASPs).

This supervisory convergence work aimed to ensure alignment on supervisory expectations related to entities offering crypto services across EEA jurisdictions in the transitional period of MiCA and promote consistent practices following the regulations’ entry into application.

The new MiCA regulation triggered controversy in Europe due to a potential de-listing of Tether’s USDT from exchanges.

Tether’s USDT Controversy Following MiCA Regulation in Europe

More crypto-related publications addressed a potential USDT ban in Europe, following the implementation of MiCA regulation.

USDT is the largest stablecoin by market cap and it faced removal from some European crypto exchanges, raising uncertainty among market participants.

Finance Magnates has recently quoted Juan Ignacio Ibañez, a member of the Technical Committee of the MiCA Crypto Alliance, who told Cointelegraph that no regulators have explicitly stated that USDT is not compliant with he new MiCA regulation, but this does not mean that it is.

While USDT delisting fears were looming in Europe at the end of 2024, Joseph Hurtado, founder of Granata Consulting firm, expressed concern over the broader impact of such a ban in Europe. He suggested that this could weaken Europe’s position in the tech and crypto industry, as quoted by Financial Magnates.

USDT could be banned in Europe if authorities deem it does not meet MiCA’s requirements, but no clear directive has been communicated by the end of 2024.

The situation led to varied responses among major crypto exchanges.

Crypto Exchanges’ Stance on USDT

In December 2024, Coinbase, the American crypto exchange, decided to remove USDT from its European services, cutting MiCA regulation.

By delisting USDT, Coinbase advised users to switch to USDC and EURC, other stablecoins.

However, other top exchanges including Binance, Crypto.com, and Kraken have retained their support for USDT, following Coinbase’s delisting of the stablecoin on December 13.

Binance’s Decision – USDT Compliance Validation

Binance stated that it’s not planning to delist USDT. This move practically validates USDT’s MiCA compliance in Europe, given the fact that the decision comes from the most important crypto exchange in the world.

In 2024, Binance onboarded more than 250 million users on its platform.

Tether’s Importance in the Crypto Industry

Tether was launched in 2014. The blockchain-enabled platform is designed to facilitate the digital use of fiat currency. Tether Limited is owned by iFinex, a company based in the British Virgin Islands that also operates the Bitfinex crypto exchange.

Tether, the issuer of USDT stablecoin, is crucial for Bitcoin and digital assets, providing a stablecoin pegged to the US dollar, and offering stability in the volatile crypto market.

USDT’s key advantages include the following:

Facilitating seamless trading
reducing reliance on fiat currencies
Enhancing liquidity across crypto exchanges

USDT is used for the following:

Arbitrage
Remittances
A store of value in uncertain market conditions

Also, in 2023, Tether stated via a post on X that the company understands the importance of energy in driving progress and enabling thriving communities. This is why it became dedicated to harnessing the power of renewable energy to mine Bitcoin which it called “the world’s most open and secure monetary network.”

It’s worth noting that this month, Tether made a bold move, announcing to relocate its operations to El Salvador, after securing a Digital Assets Service Provider license, allowing it to operate as a stablecoin issuer in the crypto-friendly nation.

The nation’s president, Nayib Bukele, highlighted the move via a post on X, sharing Paolo Ardoino, Tether’s CEO, message.