Tether (USDT) Stablecoin Faces Hurdles From EU's MiCA Regulation and Celsius Lawsuit

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

Despite achieving substantial profits, crypto firm Tether faces new challenges and hurdles. In Q2 2024, the company reported a net profit of over $1 billion, mainly driven by its investments in U.S. Treasury bills. However, new regulations and legal disputes now threaten Tether's operations and stability.

One major challenge is the upcoming Markets in Crypto-Assets (MiCA) regulation in the European Union. The new rule will impose strict requirements on stablecoins like USDT, presenting challenges to Tether's business operations and compliance, especially regarding transparency and reserves.

The main hurdle for USDT 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 poses a risk as, in the event of financial instability, it could lead to massive bank runs that would not only threaten the stability of the stablecoin itself but also traditional banks holding these deposits.

Another challenge facing Tether is a lawsuit from Celsius, a collapsed cryptocurrency lending platform. Celsius is suing Tether for $2 billion in Bitcoin, claiming 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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