Tether Market Cap Drops $4 Billion Following MiCA Implementation

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• The market cap of Tether’s USDT stablecoin has dropped by $4 billion in under two weeks
• EU users are swapping for other coins due to Tether’s failure to reach new regulatory standards
• Circle’s USDC coin has risen by $1.5 billion in market cap during the same period

The market cap of the world’s biggest stablecoin, Tether, has dropped $4 billion following the implementation of the Markets in Crypto Assets (MiCA) regulatory framework. Tether’s USDT token has been banned in the European Union since January 1 due to its lack of regulatory clearance, leading to EU-serving exchanges advising holders to swap their USDT for regulated coins. As a result, Tether’s market cap has dropped from $141 billion to $137 billion in less than two weeks as the effects of MiCA take hold.

First Downturn for Two Years

Holders of Tether’s USDT token have known for some time that they would not be allowed to trade the stablecoin from January 2025, and Tether’s market cap chart shows very clearly when they began to take action:

The fall from $141 billion to $137 billion in under two weeks represents Tether’s first downturn in almost two years, since when its market cap has more than doubled. Fortunately for the crypto market, the value of one USDT remains pegged to $1, despite the sell-off.

Circle Picks Up the Pieces

Tether’s troubles stem from the fact that it has fallen foul of MiCA regulations due to its collateral not being properly audited. Tether releases regular attestations, but these are not the same as external audits, and as such the company found out last year that its USDT stablecoin would not be used within the EU until this was so.

Circle seems to be the big winner, with its market cap growing by $1.5 billion since 20 December, although this was in line with its performance up to that point. Other stablecoins report few gains at all over the Christmas period and certainly none of significance.

With the bulk of Tether’s activities conducted in the US it is unlikely that this will impact the company’s outlook, but if similar stablecoin regulation were to take place in the country then the entire digital asset space could have a crisis on its hands.