🌎 Tether Faces MiCA Regulation Challenge as Circle Gains Ground

With the rise of the Markets in Crypto-Assets Regulation (MiCA) in Europe, questions have arisen about whether Tether’s USDT stablecoin can maintain its dominance in the long term.

Data shows that Tether is currently dominating the stablecoin market with a 70% share and a market cap of $115.67 billion. However, Tether CEO Paolo Ardoino has expressed concerns regarding the latest MiCA regulation, which came into force on June 30.

Under the new law, stablecoin issuers like Tether and Circle would have to keep 60% of their assets in EU-based banks. While Ardoino believes this puts the stablecoin market at risk, his competitor has already become an early adopter.

Circle, the issuer of USD Coin (USDC), has already launched the euro-pegged stablecoin, EURC, on a layer-2 blockchain. EURC is fully compliant with the MiCA regulation and already has a market cap of $36.8 million.

Luca Prosperi, the co-founder and CEO of M^0 Labs, mentioned that USDT’s dominance would depend on its use cases, such as settling retail trades. He added that “no mature market could expect one issuer to dominate 70%” of a market.

“While we do not know, ex-ante, what will be the landscape going forward, we expect Tether to decrease its market share to 10-30%.”

Maruf Yusupov, the co-founder of Deenar, stated that the adoption rate of stablecoins is still meager and at its very early stages. He added, “Once the asset hits mainstream adoption, regulatory-compliant stables might outperform Tether in the long term.”

One of the main reasons behind the growth of stablecoins is the high market volatility as users turn to them as a safe haven. Data shows that the number of total stablecoin holders increased by 8.3% over the past 30 days, reaching 114.15 million addresses.

Ethena USDe reached a market cap of $3 billion in less than four months after its launch. Ripple has also started privately testing its RLUSD stablecoin on XRP Ledger and Ethereum. Ripple CEO Brad Garlinghouse claimed that the stablecoin would likely launch before 2025.

“The winning point for stablecoins remains their flexibility, ease of adoption, and convenience compared to fiat.”

However, Luca Prosperi believes that stablecoins have “no clear standard, no transparency metrics, appropriate regulation, and no liquidity unification layer.”