A popular New York-based crypto exchange, Uphold, announced the delisting of six stablecoins, including ** Tether (USDT) **, the largest of the cohort, in response to the upcoming MiCA regulation in the European Union.

MiCA Regulation: A Game Changer

This decision aligns with the Markets in Crypto Assets (MiCA) regulation, which entirely takes effect on June 30th, 2024. Passed into law in May 2023 and partially enacted a month later, MiCA requires all digital assets to comply with its extensive regulations. However, it does raise concerns about the future of USDT in the region.

According to Tim Wang, COO of Elixir, short-term effects may lead to market dislocation for liquidity and trading markets due to USDC and USDT dominance on centralized exchanges.

In an exclusive statement to CryptoPotato, the Elixir executive mentioned that an intermediate-term solution would likely be needed unless the EU decides to stop facilitating crypto markets altogether.

The Dominance of US Dollar-Backed Stablecoins

Wang also noted that the US dollar-backed stablecoins and assets are still the primary form of collateral in the crypto markets as Euro stablecoins have failed to gain much adoption at all.

The new EU crypto laws impose stringent regulations on fiat-backed stablecoins and e-money tokens exceeding a specific adoption threshold defined by seven quantitative and qualitative indicators. This system oversees the European Banking Authority instead of national authorities.

Critical provisions of MiCA include a 1:1 backing of fiat-based stablecoins with liquid reserves, custodial separation of reserve assets, and a prohibition on algorithmic stablecoins.

Uphold, among several other major crypto exchanges, such as Kraken, Binance, and OKX, has changed its stablecoin listing policies to ensure compliance and avoid regulatory issues.

Global Influence on Crypto Regulations

While the upcoming MiCA regulations in the EU could set a precedent influencing crypto regulations in other regions, including the US, the provisions for stablecoin may not be as important.

Unlike other regulatory frameworks that originated in Europe and were adopted in the US, such as GDPR evolving into CCPA in California, Wang believes that stablecoin regulation will be more complex since "stablecoin hegemony" will increasingly become a contentious political topic, exemplified by former President Donald Trump's recent meetings with the US-based Bitcoin miners to discuss the future mining in the country.

"Stablecoin hegemony will increasingly become a contentious political topic," said Tim Wang, COO of Elixir.

The delisting of Tether by Uphold marks a significant shift in how stablecoins will operate within the EU. As MiCA regulations loom, the crypto world watches closely, anticipating further disruptions and adaptations in the market.