Tether pulled its USDT stablecoin from the European market rather than comply with the European Union's new Markets in Crypto-Assets (MiCA) rules, which took full effect this month. The move leaves Circle's USDC as the dominant regulated stablecoin in the bloc — but Circle itself is now pushing for a regulatory change that could let competitors like Tether back in without a full EU license.
Why Tether left
MiCA's stablecoin provisions, which became binding on July 1, 2024, require issuers to hold at least 60% of reserves in bank deposits. Tether, which is incorporated in El Salvador and has not sought a European license, chose to exit rather than restructure its reserve management. The company also faces scrutiny in the United States, where it has not complied with the new stablecoin law, instead launching a separate US-compliant coin.
For now, European users cannot buy or sell USDT through regulated exchanges in the EU. The gap has been filled largely by Circle's USDC, which obtained a French license in 2024 and meets MiCA's requirements.
Circle's equivalence pitch
Patrick Hansen, Circle's EU policy director, has proposed that the EU adopt an 'equivalence' mechanism for foreign stablecoin issuers. Under such a system, the EU would recognize a non-EU issuer's home-country regulations as equivalent to MiCA, allowing the issuer to operate in the bloc without setting up a separate licensed entity.
Equivalence is a well-established tool in EU financial law — it exists for insurance and banking, for example — but it has never been applied to stablecoins. MiCA currently contains no such provision. Hansen's proposal would effectively open the door for Tether and other non-compliant issuers to re-enter the European market, provided their home regulators meet EU standards.
Circle itself already complies with MiCA, so the equivalence mechanism would primarily benefit its competitors. The proposal has drawn attention because it comes from a company that stands to lose market share if Tether returns.
What's at stake for the EU
The European Commission is scheduled to begin its first review of MiCA in May 2026. That review is the next opportunity to amend the regulation, including adding an equivalence clause. Until then, the current framework stands: foreign stablecoin issuers must obtain a full EU license to operate.
EU policymakers have been wary of dollar-backed stablecoins, which they see as a threat to monetary sovereignty. The European Central Bank is developing a digital euro, a retail central bank digital currency that would compete directly with private stablecoins. Allowing equivalence could accelerate the entry of dollar-pegged tokens, potentially undermining the digital euro project.
For Tether, the calculus is different. The company has not sought compliance in either the EU or the US, and its base in El Salvador offers a lighter regulatory touch. Whether it would apply for equivalence under a future EU regime — or simply stay out — remains an open question.
The digital euro factor
The ECB's digital euro project adds another layer. If the EU were to recognize foreign stablecoin regulations as equivalent, it would effectively greenlight dollar-backed tokens in the eurozone. That runs counter to the ECB's goal of ensuring that European payments remain under European control. The digital euro is still in development, with no firm launch date, but its existence shapes the political appetite for equivalence.
For now, the European stablecoin market belongs to Circle. The next move belongs to the European Commission, which will decide whether to open MiCA to foreign issuers when it reviews the rules in 2026.
