Hassan Maishera
TL;DR
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Tether’s USDT market cap dipped below $138 billion following MiCA’s full implementation.
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The decline was the largest since the FTX collapse in November 2022.
Tether’s USDT Market Cap Dips Below $138 Billion
Tether’s USDT, the world’s leading dollar-pegged stablecoin, saw its market cap decline by 1.2% on Thursday, the largest decline since the FTX collapse in November 2022.
This latest development comes following the full implementation of the European Union’s Markets in Crypto-Assets (MiCA) regulation earlier this week. The market cap declined by 1.2%, dropping from $138.8 billion to approximately $137 billion.
The decline occurred roughly two years after the FTX collapse, which caused USDT’s market cap to lose 5.7% of its value. In the last two weeks, USDT’s market cap lost 2.7% of its value, down from its record high of $141 billion on December 19 to now stand at $137.1 billion.
USDT’s market cap decline also saw it lose third place in the market to XRP. Ripple’s XRP is now the third-largest cryptocurrency, with a $140 billion market cap.
Market analysts attribute this decline partly to the full implementation of MiCA, though broader market dynamics have also contributed to the stablecoin’s shrinking capitalization.
MiCA went into full effect on December 30th and established stringent regulatory requirements for stablecoin issuers within the EU. While speaking to The Block, decentralized lending platform WeFi Head of Growth Agne Linge said meeting the requirements could be economically challenging for large stablecoin issuers like Ether. Linge added that,
"The new EU law now requires that small stablecoins issuers keep 30% of their reserves in a low-risk commercial bank within the EU, while bigger players like Tether must keep 60% or more in banks. Considering Tether's large capitalization and global adoption, meeting this demand is not economically viable without disrupting the broader crypto ecosystem."
Despite that, Tether’s large market cap and global adoption would enable it to absorb the negative effects of a potential exit from the EU market. Linge also said,
"Tether's operations remain largely insulated from potential regional disruptions. The company also has a high-profit margin and is on track to end the year with $10 billion in earnings."
Some crypto exchanges, including Coinbase Europe, have delisted USDT from their platforms following MiCA’s full implementation. The move was to comply with MiCA’s requirements as exchanges seek to align with Europe’s new regulatory framework.
