Could Tether Return to Europe? The MiCA Review Could Open the Doors

• The consultation on MiCA proposes recognizing foreign frameworks such as the U.S. GENIUS.
• Regulators warn that without safeguards, the risk of reserve leakage is real.

The EU has opened a consultation to review the Markets in Crypto-Assets Regulation (MiCA). The regulation, which is being implemented gradually from 2024, will come into full effect on July 1, 2026, when the transitional period for service providers ends. Now, a key alternative is on the table: the equivalence regime, which could open the doors for Tether (USDT) to return to European territory.

Patrick Hansen, head of EU policy affairs for Circle, one of the world's leading stablecoin issuers, noted on July 24 that equivalence is shaping up to be a <> to the multiple issuance model, currently the only regulatory pathway under MiCA.

Equivalence reduces duplicative compliance burdens and allows non-EU companies to operate without a local establishment. Patrick Hansen.

In other words, an issuer like Tether could operate in Europe without having to set up a subsidiary from scratch. But the opening will not be free of charge.
While the current MiCA model requires a local subsidiary and duplicates costs, the equivalence proposal would allow stablecoins to operate in the EU by recognizing foreign standards. Source: CriptoNoticias/ Image created using Gemini.

The technical lifeline that could reopen the doors for Tether in Europe {#h-the-technical-lifeline-that-could-reopen-the-doors-for-tether-in-europe}

The European Commission published a consultation document in May 2026 asking whether regulatory equivalence could replace the demanding local establishment model. Instead of forcing a foreign company to create a European subsidiary from scratch, the Commission would assess whether the laws of the home country, such as the GENIUS in the U.S. or the developing framework in the UK, offer a level of protection equivalent to that of MiCA.

Here, a key nuance arises. Tether Holdings Limited, the issuer of USDT, is registered in the British Virgin Islands and is licensed as a digital asset issuer in El Salvador, not in the United States. Therefore, USDT is not regulated under the GENIUS law nor under any framework that the EU currently considers equivalent.

However, Tether already has a letter prepared. This is USAT, a stablecoin regulated under the GENIUS and issued by Anchorage Digital Bank in the U.S. That one would be in a position to qualify for equivalence if approved by the EU. Tether's return to Europe could be more likely through USAT than USDT.

The reason for this potential change of heart by the European Union is numerical:

99% of global stablecoins are issued outside European borders, according to industry estimates cited by Hansen. Brussels has realized that requiring local establishment may end up isolating the continent from global liquidity centered around stablecoins.

This equivalence approach already exists in other European financial regulations, such as Solvency II (for insurance) or EMIR (for derivatives), where frameworks from countries like Brazil, Japan, or Mexico are recognized as equivalent to European ones.

Would this mechanism allow Tether to operate without duplicating its operational structure? Technically yes, but it will depend on which jurisdictions are recognized as equivalent. The Commission has yet to define that list.

The real hurdle: reserves, not headquarters

Even if equivalence is established, Tether's reserve model, predominantly based on U.S. Treasury bonds, clashes with the philosophy of MiCA.

The regulation requires that issuers of significant stablecoins maintain at least 60% of their reserves in European bank deposits (Article 36). Tether concentrates approximately 80% of its reserves in short-term Treasury bonds and only about 5% in cash.

Its CEO, Paolo Ardoino, has described MiCA's requirement as "very dangerous" due to the systemic risk that, in his opinion, would arise from concentrating reserves in small European banks.
Paolo Ardoino has labeled the demands of the MiCA regulation as "dangerous" and "poorly conceived." Source: Archive.

The European Systemic Risk Board (ESRB) has supported this concern from the other side. It warns that a run on stablecoins backed by U.S. Treasury bonds could freeze debt markets, as happened in 2020.

For the ESRB, the risk is not the crypto crash, but who gets hurt when the market tries to exit one. Moreover, the dominance of dollar-pegged stablecoins threatens the monetary sovereignty of the EU, as regulators in the bloc have warned.

Therefore, equivalence will not solve Tether's problem if it is not accompanied by a reconsideration of the 60% requirement for European bank deposits. And that is a debate the Commission has yet to open.

What do regulators say?

In the corridors of the Directorate General for Financial Stability in Brussels, caution prevails. National authorities wonder if this regime would expose European investors to cross-border supervisory risks, especially during times of volatility when massive capital migration could strain the local market.

Proponents of equivalence, like Hansen, argue that "it would reduce duplicative compliance burdens" and allow European users to access global liquidity. Critics, including some central banks, warn that recognizing foreign frameworks could bypass the investor protection standards that MiCA enshrines.

The public consultation also addresses other critical fronts for the market. Among them, the prohibition of paying interest on deposits in stablecoins, set out in Articles 40 and 50 of MiCA, and the adjustment of the legal limit between MiCA and the Directive on Markets in Financial Instruments (MiFID II), the regulatory boundary that defines which tokens are treated as simple crypto-assets and which as traditional financial instruments.

The Commission asks whether the prohibition on interest should be maintained or relaxed, which could transform the stablecoin market into a remunerated savings product. But all these questions have a deadline.

A key detail: the reserve requirement that Tether rejected {#h-a-key-detail-the-reserve-requirement-that-tether-rejected}

One of the points explaining why Tether did not comply with regulation and left the EU is the requirement to maintain 60% of its reserves in European bank deposits (Article 36 of MiCA).

At the time, Tether argued that this requirement limits its operational flexibility, while Circle (issuer of USD Coin) did obtain a license under MiCA and complies with these standards.

If equivalence is approved, foreign issuers could be exempt from this requirement as long as their home framework offers equivalent guarantees. This would explain why Tether, through its CEO Paolo Ardoino, has publicly shown interest in the review of MiCA. This is to allow it to operate in Europe without modifying its reserve structure.

The timeline that would define Tether's return {#h-the-timeline-that-would-define-tethers-return}

The public consultation is aimed at crypto asset issuers, service providers (CASPs), central banks, finance ministries, and competent national authorities. According to the register of the European Securities and Markets Authority (ESMA), there are currently 227 CASPs registered in 25 countries of the European Economic Area.

The deadline to respond to the online questionnaire ends on August 31, 2026, with a possible extension to September 30. What is decided in this process will set the definitive course for digital assets in the region.

For the European user and the global ecosystem, the approval of equivalence will mean the difference between an integrated market with global liquidity or a protectionist and inaccessible environment, as already reported by CriptoNoticias last June.

Now, the decision on equivalence is not just technical. It is a strategic bet on the financial integration model that Europe wants to lead. If it succeeds, the continent will open up to global liquidity. If rejected, the European crypto asset market could be isolated in an ecosystem that has already chosen other innovation centers. Time is running out, and August 31, 2026, is the date that separates an integrated market from a protected one.

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Tags: LatestLegal frameworkStablecoinTether (USDT)European Union