Kraken May Drop USDT in Europe Due to New Regulations

Kraken, a crypto exchange, is contemplating withdrawing support for the stablecoin Tether (USDT) within the European Union. This decision is driven by the upcoming implementation of the Markets in Crypto-Assets Regulation (MiCA). As reported by Bloomberg on May 17, Kraken is actively assessing strategies to align with the forthcoming MiCA guidelines.

MiCA’s introduction will occur in two stages. The initial phase, pertaining to stablecoins—referred to as asset-referenced tokens (ARTs) and e-money tokens (EMTs)—will commence on June 30, 2024. The subsequent phase, encompassing rules for crypto service providers, will be enacted on December 30, 2024. Kraken’s representative mentioned that they are preparing for various scenarios, including the potential exclusion of specific tokens like USDT. They stressed that as the regulatory landscape becomes clearer, more definitive decisions will be made.

In reaction to Kraken’s statements, Tether expressed that they expect exchanges to focus on providing EUR liquidity for European users while continuing to use USDT for entry and exit point transactions. It’s noteworthy that MiCA doesn’t explicitly use the term “stablecoin.” Instead, it defines ARTs and EMTs, both of which could be considered significant by the European Banking Authority (EBA) based on certain criteria. For large stablecoins like USDT, there is a daily transaction cap of 200 million euros.

Tether’s CEO, Paolo Ardoino, has voiced his criticism of the new European regulations, stating that Tether is not keen on being governed under MiCA. He specifically pointed out a requirement that 60% of stablecoin reserves must be held in cash deposits across various banks. Ardoino highlighted the challenge of this stipulation, remarking that finding even a single bank willing to accept such a business in Europe is currently very difficult.

At the present moment, USDT boasts a market capitalization of $111.2 billion, and its global trading volume stands at $61.24 billion. These numbers reflect USDT’s significant role in the cryptocurrency market, which could make Kraken’s potential decision to delist it in Europe quite impactful.

Kraken’s deliberations aren’t isolated. Earlier in March, OKX, another major crypto exchange, undertook similar measures by discontinuing support for USDT trading pairs in the European Economic Area. This decision was also in preparation for the forthcoming MiCA regulations.

As these compliance deadlines approach, exchanges like Kraken and OKX are likely trying to navigate the complexities of the new regulatory environment. Their proactive steps might be aimed at ensuring seamless operations under the new framework, while also safeguarding their interests and those of their customers.

The evolving regulatory landscape underscores the necessity for crypto exchanges to be adaptable and vigilant. With the first phase of MiCA coming into effect in mid-2024, the coming months will be crucial for exchanges and stablecoin issuers to finalize their strategies and make any necessary adjustments to their offerings in the European market.