Tether (USDT) is facing issues on several fronts. The stablecoin giant will exit Europe in a few days due to its regulatory hurdles.
Amid this challenge, USDT has witnessed volatility, leading to its depegging from its $1 value.
This development has generated concerns and reactions from stakeholders in the cryptocurrency space.
Tether’s Depeg Sparks Investor Concerns
Current market data shows that USDT is experiencing mild fluctuations in price.
This development has persisted for several hours, increasing the Fear, Uncertainty, and Doubt (FUD) around the asset.
USDT was exchanging hands at $0.9983 as of this writing, representing a 0.10% decrease. This shifts it from its 1:1 pegging with the U.S. dollar.
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Besides the de-pegging, the widely used stablecoin has slowed down in general.
As highlighted by Ali Martinez, a renowned on-chain analyst, in a post on X, over the past 10 days, Tether has slowed down in adding liquidity to the market.
That is, the circulating supply of USDT has decreased considerably. Martinez says the reduction is worth around $1.3 billion.
The implication is that users have increased their USDT to fiat currency redemption rate. Usually, Tether removes tokens that have been redeemed from circulation.
Concerns over Tether’s future might have triggered this redemption boost as it exits the European market.
However, in a post on X, analyst Anton Golub dismissed the concerns, maintaining that Tether does not need Europe to thrive.
According to Golub, Tether and Circle are the two leaders in the $203 billion global stablecoin market, having 80% control.
He noted that the $252 million Euro-backed market will not significantly impact Tether.
How Will Europe’s Exit Impact USDT?
Golub sees the Markets in Crypto Assets (MiCA) regulations as unprofitable for stablecoin issuers like Tether.
The 4x founder explained that MiCA requires 60% of reserves to sit in low-risk, bank-held assets. Additionally, the law bans interest payments to users.
He insisted that such regulatory restriction would prevent Tether from generating returns, and it was not in their interest to comply.
Golub believes the MiCA regulation could disrupt traders’ liquidity.
He hinges this prediction on the fact that 90% of stablecoin usage is fueled by the movement of funds between exchanges.
Hence, forcing users to rely on legacy banking systems might threaten liquidity flows. Such a scenario played out during the USDC crisis after the collapse of Silicon Valley Bank.
In Golub’s opinion, without USDT in the European market, the region risks losing access to the most liquid stablecoin.
He foresees a future where liquidity and traders might shift to other areas and drive innovations elsewhere.
Tether Makes Foray into the Middle East
Meanwhile, Tether Holdings Limited says it has the green light to operate in Abu Dhabi, in the United Arab Emirates.
This followed the issuance of an operating license to the company, making it a pioneer stablecoin in the region. Notably, the UAE is looking to become a global finance hub, and Tether’s presence is a step towards that objective.
Paolo Ardoino, Tether’s CEO, stated that regulatory approval is key to opening more doors for collaboration and growth in the Middle East region.
Market analysts say the development might help compensate for Tether’s exit from the European market.
