Crypto.com will delist USDT in the EU: the implications for Tether

Yesterday, Crypto.com sent an official communication to all its users residing in EU countries announcing the delisting of USDT and other tokens. 

The decision is linked to the new European crypto regulation, the MiCA, and to the fact that the issuer of USDT, Tether, is not recognized by the EU as an e-money issuer. 

The communication from Crypto.com on the delisting of USDT in Europe

The exchange states that starting the day after tomorrow, Friday, January 31, 2025, some services on the platform will be interrupted for residents in the EU.

It does not specify exactly which services, except for the staking of ETH and SOL, but which are the tokens whose services will be interrupted. 

Such tokens are: USDT, DAI, PYUSD (PayPal USD), PAX (Pax Dollar), PAXG (Pax Gold), WBTC (Wrapped Bitcoin), LCRO (Liquid CRO) and XSGD.

However, the communication makes explicit reference to the purchases of these tokens, without saying anything about the sale or withdrawal. 

The new UE regulation

The MiCA officially came into force last year. However, there is still a certain period of time to align. 

A recent official communication from ESMA (European Securities and Markets Authority) indeed states that services related to unauthorized tokens will be suspended in the EU starting from January 31, while there should be time until March 31 to sell or withdraw them.

A previous official communication from ESMA even stated that there was time until July 2026.

Therefore, there is still no clarity on the matter. What is known is that Crypto.com has decided to follow the guidelines outlined in the latest communication from ESMA.

The consequence is that starting from January 31, 2025, on the Crypto.com exchange, it will no longer be possible to purchase tokens like USDT, and it will probably not even be possible to exchange them with other cryptocurrencies. However, it should remain possible to sell them, for example in dollars, or in euros, or in other authorized stablecoins, and withdraw them.

USDT (Tether)

The key point, as reported in the latest communication from ESMA, is that the new European crypto regulation prohibits centralized exchanges from providing services involving asset-referenced tokens

(ART) and the e-money money token (EMT) non compliant. 

The ART are tokens collateralized in other assets, such as PAXG and DAI, while the EMT are the stablecoins collateralized and convertible into fiat currencies, such as USDT. 

The fact is that to fall into the category of EMT compliant with MiCA, the token issuer must be recognized by the EU as an authorized issuer of electronic money (e-money). Tether, which issues USDT, is not, therefore USDT in the EU cannot be considered an EMT compliant. 

The same applies to ART, and since DAI is issued and managed by decentralized smart contracts, there is no single issuing or managing entity that can request and obtain recognition from the EU. 

All this explains why residents of the European Union are no longer allowed to use stablecoins like USDT or DAI on centralized crypto exchanges. However, they remain usable on non-custodial wallets and DEXs (decentralized exchanges). 

What to do with the delisting of USDT on Crypto.com

First of all, it must be said that for now Crypto.com is the only exchange known to have announced the suspension of services related to USDT in the EU. However, in recent months other exchanges had also suspended some services. 

Furthermore, in order to sell or withdraw USDT, DAI, and the other tokens not authorized in the EU, there should still be time until March 31. 

Finally, such limitations concern only centralized exchanges, and probably not even all of them, given that there are some that operate abroad and do not comply with EU regulations. 

European users will be able to continue using USDT, DAI, and other non-compliant tokens with MiCA on their non-custodial wallets, which are anonymous and do not require residence verification, and on decentralized exchanges that from this point of view function exactly like non-custodial wallets. 

Those who wish to continue using stablecoins on centralized exchanges in the EU can convert all their stablecoins into compliant tokens, such as USDC, or wait and hope that USDT will eventually become compliant. 

Will Tether adapt to MiCA regulation?

The problem is that the company Tether does not seem to have any intention of becoming compliant with the MiCA.

The company indeed considers it dangerous to carry out all the necessary procedures to be recognized by the EU as an electronic money issuer, because among other things this would entail the need to move the collateral from US bonds to cash held in European banks.

As demonstrated by the case of USDC in March 2023, the collateral (USD) held at banks involves a certain level of risk, because if the bank where it is held closes or fails, the stablecoin issuer loses access to the collateral, effectively creating a gap. 

Tether itself had a somewhat similar problem when in 2018 some of its funds were frozen due to the implication of the bank where it held part of the collateral in a judicial investigation. 

With US bonds, the risks from this point of view are lower, therefore Tether has decided not to convert its holdings in US bonds into cash, also because thanks to these it obtains an excellent profit.