Tether Faces Twin Threats: Lawsuit and MiCA Regulations Loom Over USDT Stability

Popular crypto firm Tether is currently facing significant hurdles, despite the company achieving substantial profits with its current business model. 

In Q2 2024, Tether reported a net profit of over $1 billion, primarily driven by its investments in U.S. Treasury bills. However, the company now faces challenges from new regulations like the EU’s MiCA rules, which impose stricter requirements on stablecoin issuers, and ongoing legal disputes that could impact its operations and stability.” 

EU MiCA Crypto regulation vs Tether 

Latest multiple media reports noted potential risks facing Tether, the issuer of the top stablecoin USDT, due to new crypto regulations and legal challenges. One major concern is the upcoming Markets in Crypto-Assets (MiCA) regulation in the European Union. The new rule could impose strict requirements on stablecoins like USDT.

New rules might challenge Tether’s business operations and compliance, especially regarding transparency and reserves. 

The main challenge facing the USDT stablecoin under the European Union’s MiCA regulations is the strict requirement for stablecoins to hold 60% of their reserves in cash deposits within banks. 

On this matter, Paolo Ardoino, CEO of Tether, highlights that these cash deposits are uninsured beyond €100,000. This creates a significant risk because, in the event of financial instability, it could lead to massive bank runs. Such runs would not only threaten the stability of the stablecoin itself but also pose risks to traditional banks holding these deposits. This regulatory requirement makes it difficult for USDT to operate securely under MiCA’s framework, potentially jeopardizing its survival in the European market. 

Celcius vs Tether (USDT)

Tether is also dealing with a lawsuit that could further impact its stability and market confidence.

Celsius, a collapsed cryptocurrency lending platform, is suing Tether for $2 billion in Bitcoin. 

As per reports, Celsius claimed that Tether failed to honor a contractual agreement related to Bitcoin purchases, which they believe caused significant financial harm. The lawsuit is part of Celsius’s ongoing bankruptcy proceedings, and the outcome could have major implications for both companies.

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