USDT Restrictions Under MiCA in the European Union

The European Union’s new MiCA rules on cryptoassets suggest that cryptocurrency exchanges in the EU must exclude from listing stablecoins that have not received regulatory approval by December 30, 2024. Such cryptocurrencies could include Tether’s USDT – the company has not received local authorization. MiCA requires that all stablecoins listed on cryptocurrency exchanges be issued by issuers that have obtained a special license. Circle, Tether’s closest competitor, received such a license in July. The total capitalization of stablecoins is approximately $200 billion, according to data as of December 20. Of that, USDT accounts for $140 billion and Circle’s USDC accounts for $42 billion. The Tether token leads all cryptocurrencies by a wide margin in terms of trading volume. Over the past 24 hours, USDT has accounted for $218 billion of the market’s total trading volume of $385 billion. In comparison, Bitcoin accounted for $110 billion and USDC for $15 billion.

What is Tether’s USDT. What you need to know about the main stablecoin

In November 2024, Tether decided to abandon its EURT steiblcoin, which is pegged to the euro exchange rate, and invest in StablR, a European company that issues such assets. StablR is an issuer of EURR and USDR and received the necessary license in Malta this summer to operate in Europe. Shortly thereafter, Tether announced that it will issue MiCA-compliant EURQ and USDQ stablecoins in partnership with Quantoz Payments. The tokens will be launched on Hadron, Tether’s platform for launching stablecoins and other tokenized assets. At the same time, industry participants believe that USDT’s delisting puts Europe at risk of missing out on the cryptocurrency boom associated with the election of U.S. President Donald Trump. Cryptocurrency executives warn that these MiCA rules could lead to an outflow of liquidity from the markets without meeting EU targets, making the region less attractive to crypto traders at a critical time. According to industry participants, the delisting of Tether “limits” the Europeans themselves, as USDT is the most liquid stablecoin to date, the report said. Experts note that most cryptoassets trade paired with USDT, so investors who have to exit a USDT pair to buy the same asset to trade paired with another stablecoin will face losses.

In February 2025, Coinbase announced the removal of the Tether (USDT) steelcoin from the list of available assets for its European customers. This decision is due to the need to ensure compliance with the European Union’s Markets in Cryptoassets Regulation (MiCA), which comes into effect in 2025. MiCA establishes common rules for cryptoasset issuers and cryptoasset-related service providers to protect investors and ensure financial stability. The regulations will require stablecoin issuers to maintain adequate reserves and transparency, as well as adhere to strict risk management requirements. Coinbase expressed doubts about Tether’s ability to meet the new standards set by MiCA, which was the reason for USDT’s delisting on the European market. The company emphasized its commitment to regulatory compliance and the safety of its customers. Coinbase users in Europe have been notified to convert their USDT to other supported stablecoins or cryptocurrencies before a certain deadline, after which USDT transactions will no longer be available. This development highlights the importance of cryptocurrency market participants adapting to new regulatory requirements aimed at increasing the transparency and reliability of financial instruments in the European Union.

In March 2025, Binance will also delist non-MiCA compliant stablecoin trading pairs for EEA users and USDT is among the list of excluded assets. Following the latest guidance from EU authorities regarding stackablecoins, the world’s largest cryptocurrency exchange is making changes to the availability of non-MiCA compliant stackablecoins in the EEA to meet regulatory requirements. The affected assets are USDT, FDUSD, TUSD, USDP, DAI, AEUR, UST, USTC and PAXG. Binance will stop providing services for unauthorised Spot stablecoin trading pairs on 31 March 2025.

Why it happened?

MiCA’s stablecoin rules apply from 30 June 2024. EU CASP services involving non-compliant stablecoins are also subject to ESMA’s Opinion of 8 October 2026.

The main reasons for the exclusion of USDT from trading platforms in the EU are:

1. Non-compliance with MiCA requirements

MiCA imposes strict requirements on issuers of stablecoins, including:

• Having transparent reserves that fully cover liabilities to holders.
• An obligation to hold reserves in liquid and low-risk assets.
• Accountability to EU regulators, including the obligation to obtain a license to issue electronic money (if a stablecoin is classified as electronic money – e-money token).

USDT problem: Tether does not fully disclose its reserves and their composition, making it potentially non-compliant with the new standards.

2. Financial stability risk

• MiCA requires issuers of systemically important stablecoins (large in volume) to ensure strict liquidity controls.
• Tether is the largest stablecoin by market capitalisation and its possible loss of liquidity could pose risks to the EU financial market.

3. Doubts about the transparency of reserves

• Tether Limited does not fully disclose audited reserve reports.
• In October 2021, the CFTC ordered Tether to pay a USD 41 million civil monetary penalty over misleading statements about the backing of USDT.

4. Competition with regulated stablecoins

• MiCA-compliant stablecoins such as Circle (USDC) or Euro-stablecoins issued under an e-money license may be preferred in the EU.
• European regulators may prioritise steblecoins that comply with EU rules.

5. Stringent requirements for issuers

• Under MiCA, companies issuing steiblcoins must be registered in the EU and comply with strict AML (anti-money laundering) regulations.
• Tether is registered outside the EU (in the British Virgin Islands), making it more difficult to regulate.

The restrictions are substantive supervisory requirements for CASPs, rather than merely commercial pressure to delist tokens. They must be distinguished from a general ban on private ownership.

What alternatives to USDT exist?

Stablecoins must be assessed individually for their issuer’s authorisation and the services offered in the EU. Circle’s USDC and EURC are issued under its European MiCA-compliant framework. TUSD, BUSD, DAI and EURT should not be presented as automatically MiCA-compliant alternatives.

1. USD Coin (USDC) is the main competitor to USDT

Issuer: Circle (USA)

Features:

• USDC is backed by cash and cash-equivalent reserve assets, including short-dated US Treasury exposure; its reserves are not held entirely as deposits in US banks.
• Regularly audited and publishes reports on reserves.
• Backed by major exchanges and financial institutions (e.g. BlackRock).
• Likely to become the main steiblcoin in Europe, as it is better compliant with MiCA requirements.

2. TrueUSD (TUSD)

Issuer: TrustToken

Features:

• Undergoes regular audits (reserves are confirmed by companies like Armanino).
• Supported by many exchanges, including Binance.
• EU regulators may consider it as a more transparent alternative to USDT.

3. EUR-backed stablecoins ( EUR-stablecoins ).

MiCA is not only focused on USD-backed stackablecoins, but also on EUR-backed stackablecoins. Popular variants:

• EUROC (Euro Coin) from Circle – an analogue of USDC, but pegged to the euro.
• Stasis EURO (EURS) – one of the oldest euro-backed stablecoins.
• Tether EURt (EURT) – however, like USDT, may face regulatory issues.

4. Binance USD (BUSD) – limited application

Issuer: Paxos (under NYDFS license, USA)

• Binance has abandoned the development of BUSD, but Paxos may launch a new stablecoin under a different brand.
• Its use is limited in Europe.

5. DAI (Decentralised Stablecoin)

Issuer: MakerDAO

Features:

• Backed by a basket of assets, including USDC and ETH.
• More decentralised but still reliant on centralised assets.
• Could remain a key alternative for DeFi applications in Europe.

Which stablecoin will become mainstream in Europe instead of USDT?

USDC is likely to be the main USDT steiblcoin in the regulated EU market as it:

• Passes audits and complies with regulations.
• Is backed by liquid assets and publishes reports.
• Used by major financial players.

At the same time, Euro-stablecoins (EUROC, EURS) will gain traction because of the support of EU regulators.

If Tether does not adapt to MiCA, its place in Europe will be taken by more transparent and regulatory compliant stablecoins.

With comprehensive MiCA (Markets for Crypto Assets) regulations coming into effect in Europe this year, it is believed that these regulations will prevent Tether from operating in the region.

As of early 2025, Tether is the world’s largest stable USD coin, in the first quarter of this year, it made a record profit of $4.52 billion. However, Tether’s market share is gradually declining and currently stands at around 69%. In contrast, USDC Circle, a regulated alternative to USDT, has increased its market share to 11 %.

In a related development, Circle, following the success of its dollar-based steblicoin (USDC), has launched a new euro-based steblicoin, EURC. Circle EURC is designed to fill an important gap in the market as a regulated euro-based stablecoin. With the possibility of large USD stablecoins such as Tether leaving the European market due to MiCA regulation, we can expect EURC to play an important role in Europe.

While these developments are taking place, it is important to remember that USD stablecoins have always dominated the world, and other currencies have not shown much presence in this area. If the market moves in this direction, stable coins like EURC could gain popularity. However, if these regulatory changes isolate Europe and take it in a completely different direction, the continent could be left behind in the cryptocurrency world.

Why USDT delisted in Europe?

The main reasons why Tether is not compliant with European regulations are due to its failure to comply with the transparency and oversight obligations imposed by MiCA rules. MiCA requires issuers of stablecoins to maintain adequate reserves and report them on a regular basis. Tether has historically had transparency issues with reserve assets, which may make it difficult to meet these requirements. In addition, MiCA imposes limits on the volume of transactions involving stablecoins, which could create systemic risk. Due to the high transaction volume, USDT may be subject to stricter scrutiny. While Tether has yet to make an official announcement, there are numerous reports that the company is considering alternatives in response to regulation in Europe.

All of these developments come against the backdrop of some major cryptocurrency exchanges beginning to restrict USDT trading pairs before MiCA regulations take full effect. For example, the OKX exchange has imposed restrictions on USDT trading pairs, and other major exchanges such as Kraken are also considering a similar decision. One of the most high-profile news regarding USDT trading pairs was the recent announcement by Coinbase exchange. Coinbase is preparing to delist stablecoins that are not MiCA compliant, such as USDT, around December.

MiCA did not introduce a blanket prohibition on owning USDT on 1 January 2025. Services provided by authorised CASPs must also be assessed against ESMA’s supervisory expectations published on 8 October 2026. Tether is a company issuing USDT token with a market capitalisation of $140 billion (third in the list of cryptocurrencies by capitalisation after bitcoin and ether), while its closest competitor – USDC token from Circle – has a capitalisation of $43 billion. And with the information about USDC’s compliance with the requirements that USDT has yet to pass, this difference is decreasing. However, the great popularity of USDT is undeniable.

Is USDT legal in Europe in 2025?

Regulators and Governments: Claims by a number of governments that banning USDT allows for greater control over cryptocurrency markets and reduces the risk of financial fraud appear to be more of a myth. Tether itself reports working with 180 intelligence agencies in 45 jurisdictions to freeze stolen funds, including freezing funds from wallets that have passed through and remained free on the wallets of its competitor Circle.

Markets in Crypto Assets (MiCA) – The Markets in Crypto Assets Regulation in Europe comes into effect in June 2023: the regulator’s requirement to hold at least 60 percent of stablecoin issuers’ reserves in EU bank accounts is something Tether itself is in no hurry to comply with. Tether CEO Paolo Ardoino said that “this concentration of funds in European banks could lead to vulnerabilities, as only a fraction of these deposits will be available for immediate withdrawal. EU deposit guarantee schemes generally protect eligible deposits up to EUR 100,000 per depositor per bank. Eligibility exclusions apply, and this protection should not be confused with insurance of stablecoin holdings or full protection of an issuer’s reserves.

Tether has already invested in StablR, a European provider of stablecoins, which will help accelerate their adoption in the EU.

It is clear that the company is trying and doing everything it can to get its token accepted in EU countries.

In which countries will USDT be banned?

MiCA does not impose a general prohibition on individuals owning USDT. However, ESMA’s Opinion of 8 October 2026 states that CASPs should not provide any MiCA-regulated services involving non-compliant ARTs or EMTs, including custody and transfers. Supervisors may allow only limited, temporary services necessary to wind down existing positions and protect clients. Legacy exposures should be remediated as soon as possible and within three months of publication.

China: The Supreme People’s Procuratorate of China (SPP) and the State Administration of Foreign Exchange (SAFE) issued a public warning, emphasising that it is illegal to use Tether (USDT) as an intermediate instrument in transactions between RMB and other foreign currencies.

USA: The US Department of Justice has launched an investigation into Tether, The Wall Street Journal (WSJ) reported. The results of the investigation may well raise the issue of both restriction in use and continued circulation of the token.

Restrictions affect the services that EU CASPs can provide involving non-compliant stablecoins. Private ownership must be distinguished from regulated services, which are subject to ESMA’s October 2026 supervisory expectations.

The anti-cryptocurrency stance of banks in Europe

If you look at the banking sector and financial institutions in Europe, there is a strong aversion to cryptocurrencies in traditional financial systems. The president of the European Central Bank, Christine Lagarde, has clearly stated that cryptocurrencies “have no value”. With this stance and influence on regulatory policy, Lagarde may be hoping that cryptocurrencies are either completely eliminated or at least severely restricted in Europe. Despite this 2022 announcement, cryptocurrencies continue to grow and develop rapidly. This situation poses a potential threat to the credibility of traditional financial institutions and central banks. One of the key features of cryptocurrencies is decentralization, which aims to reduce the role of intermediary institutions in the financial system and distribute power to individuals. This state of affairs could prove challenging for the European banking sector, which is used to central authority, and could be a significant factor in their negative attitude towards cryptocurrencies. USDT has performed well over the years as a stable asset in the cryptocurrency world. As you can see, thanks to the MiCA rules, USDT, which has been used as an alternative stablecoin for many years, will become a non-compliant asset once the rules are implemented, and therefore cannot be offered as a stablecoin by cryptocurrency exchanges.

CBDC and Europe’s cryptocurrency strategy

Lagarde supports the idea of introducing a central bank digital currency (CBDC) in the Eurozone. However, she seems to think that competition from cryptocurrencies such as bitcoin is undesirable. Furthermore, as the European Central Bank continues to cut interest rates, there is the question of what the value of the euro will be. In order to service the Eurozone’s debt, a significant increase in money issuance would be required, which would reduce the value of the currency to European citizens. Lagarde probably believes that the CBDC will accelerate this process and prevent citizens from moving to safe havens such as gold, silver or bitcoin. It seems that governments and central banks, which are losing the ability to tightly control money with each new regulation, are eager to remove cryptocurrencies from the market under the pretext of protecting users, despite the fact that these assets have been around for years and have fulfilled their function.