The European Union continues to take the lead in global crypto regulation, but at what cost? As the EU enforces its Markets in Crypto-Assets (MiCA) framework, questions arise about the balance between regulatory oversight and innovation.

Recently, 10 firms received approval to issue stablecoins under MiCA, ensuring compliance with the EU’s stringent legal framework. According to Patrick Hansen, senior director of EU strategy and policy at Circle, the approved entities include Banking Circle, Circle, Crypto.com, Fiat Republic, Membrane Finance, Quantoz Payments, Schuman Financial, Societe Generale, StabIR, and Stable Mint. These firms have launched a total of 10 euro-pegged stablecoins and five U.S. dollar-pegged stablecoins.

However, one major player was noticeably absent: Tether. As the issuer of USDt—the world’s largest stablecoin with a market capitalization exceeding $141 billion—Tether’s exclusion raises concerns about how regulations may be reshaping the crypto landscape in the region.

Regulation vs. Innovation: A Growing Concern

Once praised for its regulatory clarity, the EU now faces criticism for potentially stifling technological growth. Some experts argue that strict compliance measures could limit competition and deter innovation. Economist and market analyst Steve Hanke has pointed to the EU’s heavy regulatory hand as a factor contributing to its slower economic growth compared to the U.S.

The fallout has already begun. Crypto platforms started delisting USDt for EU residents ahead of MiCA’s December 2024 compliance deadline. Other non-compliant U.S. dollar-pegged stablecoins have also been removed from EU-based services. Tether, in response, expressed disappointment, calling the delistings “hasty and unwarranted.”

“It is disappointing to see the rushed actions brought on by statements, which do little to clarify the basis for such moves,” a Tether spokesperson told Cointelegraph in January 2025.

The Risk of European Market Isolation

Industry experts warn that MiCA’s rigorous regulations could isolate the EU’s crypto market. Natalia Łątka, director of public policy and regulatory affairs at Merkle Science, suggested that foreign firms might be discouraged from entering the EU due to the high compliance costs. Furthermore, some local crypto businesses may choose to relocate outside the EU to avoid the regulatory burden.

However, the options for relocation remain limited. The United Kingdom, which left the EU in 2020, has yet to provide regulatory clarity on crypto. This uncertainty makes it an unlikely destination for firms looking to escape MiCA’s stringent requirements.

What’s Next for Crypto in the EU?

While MiCA aims to provide stability and consumer protection, its impact on innovation and market competitiveness is still unfolding. Will the EU’s regulatory framework push crypto firms away, or will it ultimately create a more secure and sustainable market? One thing is certain—crypto regulation in Europe is setting a precedent for the rest of the world to watch.