USDT Stablecoin Supply Shrinks By Record Volume in Two Years. Why?

The reason for investor concern was the early delisting of the USDT stablecoin from Coinbase Europe, Coinbase Germany, and Coinbase Custody in mid-December. At that time, company representatives stated that the Tether token allegedly did not meet the requirements of MiCA and got rid of it.

Of course, the crypto community did not appreciate the giant’s decision. After all, USDT is the largest and most popular stablecoin in the industry, on which, without exaggeration, the fate of the market depends. And any problems with the token will lead to a sharp decrease in liquidity in trading pairs, which in turn can lead to the most unpredictable consequences.

However, in the end, the digital asset continues to be available on the largest trading platforms in Europe. However, investors still decided to play it safe, which is evident from the USDT indicators.

Why is USDT supply falling?

Over the past week, the number of USDT tokens in circulation has decreased by 1.2 percent, which has reduced the project’s market capitalization from $138.8 billion to $137 billion. As analysts at The Block note , this is the largest collapse in the indicator in a week since November 10-17, 2022.


At that time, the industry was experiencing the collapse of the major cryptocurrency exchange FTX by Sam Bankman-Fried, against which USDT capitalization fell by 5.7 percent. That is, the scale of the token's current problems is quite serious.


According to analysts, the latest drop in the USDT indicator is directly related to the full launch of MiCA. However, the event caused a wave of speculation, which many investors wanted to insure themselves against.

They got rid of the stablecoin of the Tether company, exchanging it for other crypto assets or stablecoins, as well as directly withdrawing USDT into dollars. The latter is done through the issuer and leads to a reduction in the supply of the asset.

Let us recall that MiCA changes the approach to regulating digital assets in EU countries. First of all, the corresponding permit for the activity of a cryptocurrency company in one of the states of the union allows it to operate in all its other members. However, the requirements for stablecoin issuers are becoming much stricter – they affect the topic of company reserves and their liquidity.

Here’s a response from Agne Linge, head of growth at decentralized lending platform WeFi. She believes that compliance with the new regulations may simply be economically disadvantageous for giants like Tether.

A new EU law now requires issuers of smaller stablecoins to hold 30 percent of their reserves in a low-risk commercial bank within the EU, while larger players like Tether are required to hold 60 percent or more in banks. Given USDT’s large market cap and global adoption, this requirement is not economically feasible without disrupting the entire crypto ecosystem.

Linge suggests that Tether’s massive scale of operations reduces the likelihood of immediate financial impact from a possible EU exit.

Tether’s operations remain largely insulated from potential regional disruptions. The company is also highly profitable and is on track to end the year with $10 billion in profits.

According to the expert, Tether’s huge financial reserves allow the company to further diversify its products. Thus, the giant is able to reduce the risks associated with the overall capitalization of the stablecoin.

Linge also noted that many EU countries offer transition periods of six to 18 months that must be used to comply with the law or potentially exit the market. This essentially eliminates the prospect of a sudden delisting, as happened with Coinbase.


What's happening with USDT shows how much news influences the behavior of cryptocurrency investors. In fact, nothing happened to the stablecoin, and the reason for worry was speculation. However, it was enough for almost two billion dollars to disappear.