Tether’s redemptions soar as EU stablecoin rules take effect

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The future of Tether in European markets remains unclear as the European Union’s new stablecoin regulations take effect and USDT redemptions soar.

January 1 marked the official launch of the EU’s Markets in Crypto-Assets (MiCA) regulations. This event was preceded by nearly $4 billion in redemptions of USDT, Tether’s U.S. dollar-denominated stablecoin. Tether’s market cap is currently hovering around $137 billion, down from $141 billion just before Christmas.

The redemptions were the largest since the mid-2022 onset of the ‘crypto winter’ following the exposure of a host of fraudulent activities at crypto operators. This retreat culminated in the November 2022 collapse of the digital asset exchange FTX run by Sam Bankman-Fried and its affiliated market-maker Alameda Research, the then-biggest purchaser of USDT.

USDT has been trading slightly below its $1 peg since those redemptions began, suggesting customer uncertainty regarding Tether’s future in a post-MiCA environment. MiCA requires ‘significant’ stablecoins such as USDT to maintain 60% of their reserve assets in cash stored in EU banks, something Tether CEO Paolo Ardoino has claimed represents an unacceptable risk to Tether due to the potential for bank failure.

Uncertainty over USDT’s EU legality led the Coinbase (NASDAQ: COIN) exchange to delist the stablecoin in mid-December. Other prominent exchanges have hinted at following Coinbase’s lead, including Binance, which restricted “the availability of Unauthorized Stablecoins for [European Economic Area] users” on June 30. A few months earlier, the OKX exchange imposed similar limitations on its EEA customers.

In a further blow to Tether that extends beyond EU borders, Binance teamed up with Tether rival Circle, the issuer of the USDC stablecoin, with the goal of accelerating USDC adoption around the globe. Circle received MiCA approval for USDC last July, which put an even brighter spotlight on Tether’s unwillingness/inability to do likewise. (And USDC’s market cap has grown by $2 billion in the same period USDT shrank by $4 billion.)

Ardoino and ‘friends of Tether’ have begun a social media campaign to push back on claims of USDT’s imminent European demise. Some note that other exchanges have yet to delist USDT, while others point out that the EU’s member states all have grace periods in which to enforce MiCA’s edicts, offering USDT a potential window of up to 18 months in which to retain its relevance.

Despite Tether fans’ bluster, Tether itself halted support for its Euro-denominated EURT stablecoin in November, acknowledging at the time that MiCA was the catalyst behind this move.

Tether, Bitfinex doing the financial hokey-pokey?

Despite its EU issues, Ardoino tweeted on January 2 that Q4 2024 was “a great quarter for Tether.” However, we’ll have to wait another five weeks or so before the company publishes the latest attestation of its fiat reserves. The Q3 document—which is not, despite Tether’s insinuations, a proper independent audit—showed $6.1 billion worth of reserves over and above the amount of issued USDT at the time.

On December 30, just one day before the quarter ended, Tether’s wallet of BTC received an additional 7,629 tokens worth over $705 million. Later that same day, a second transfer added another 775 BTC to this total, bringing the transfers to 8,404 BTC worth over $775 billion. The BTC were sent from the Bitfinex exchange, which shares common ownership with Tether.

This is problematic for several reasons, not the least of which is that Tether/Bitfinex have a history of swapping assets ahead of inspections by third parties to preserve an image of solvency. BDO Italia, the firm Tether pays to conduct attestations, is only ever granted a look at Tether’s financial figures for a single day, traditionally the final day of the quarter, which would be the day after the Bitfinex transfers.

An hour before the new year arrived, Bitfinex transferred 30,000 BTC worth around $2.8 billion to an unknown wallet. Presumably, this is some other entity that requires some temporary rebalancing of its balance sheet. The future of finance, indeed.

Lutnick ready to Rumble

Tether has long been the subject of reports of impending indictments, most recently in the United States, where federal authorities appear to be losing patience with USDT’s popularity among terrorists, criminals and individuals/entities looking to evade U.S. economic sanctions.

However, those reports preceded the appointment of Howard Lutnick as America’s new Secretary of Commerce by President-elect Donald Trump. Lutnick, the boss of Wall Street financial services firm Cantor Fitzgerald (NASDAQ: ZCFITX), has previously claimed his firm has custody of the ~$100 billion worth of U.S. Treasury bills that allegedly make up the bulk of Tether’s reserve assets.

Tether fans believe Lutnick will help run interference for Tether with Trump, whose appointees at the Department of Justice (DoJ) and regulatory bodies like the Securities and Exchange Commission (SEC) will presumably take direction from the president regarding enforcement actions.

However, Tether appears to be hedging its bets on Lutnick’s ability to influence Trump’s decision-making. On December 20, Tether announced a $775 million ‘strategic investment’ in video-sharing platform Rumble (NASDAQ: RUM), an unabashedly right-wing platform with allies in the Republican party establishment.

Despite—or perhaps because of—Rumble’s political alignment, it has struggled to match the growth numbers of its less partisan rivals. In this aspect, it mirrors the lack of growth by the Trump-backed Truth Social platform, for which Rumble serves as a cloud service provider.

Rumble has been deepening its ‘crypto’ involvement, announcing plans in November to embark on a BTC ‘treasury strategy’ that will see the company purchase up to $20 million worth of the tokens.

Tether’s $775 million investment consists of $250 million in cash plus an offer to buy up to 70 million shares at $7.50 per share. These shares will be purchased from existing shareholders, who will likely only be too happy to sell. While its user numbers saw a boost during the 2024 U.S. election campaign, Rumble has struggled to turn a profit, losing $31.5 million in its most recent quarter, bringing its year-to-date losses to $102 million.

Rumble’s early investors included a number of figures linked to Trump’s incoming administration, including Vice-President-elect J.D. Vance and D.O.G.E. co-leader Vivek Ramaswamy. Peter Thiel, who financially supported Trump’s 2016 campaign and funded Vance’s 2022 Senate run, was also among those opening their wallets in 2021. And until mid-December, Rumble’s board included David Sacks, the billionaire that Trump recently named as his new ‘AI & Crypto Czar.’

On December 20, shortly before Tether’s investment was announced, Forbes reported that Rumble was on pace to “run out of money sometime in early 2026 unless it cut costs or raises more cash.” Rumble’s remaining cash pile was part of the $300 million raised by a special purpose acquisition company (SPAC) deal in 2022. The Wall Street firm that sponsored that SPAC? Cantor Fitzgerald.

Cantor is the top institutional holder of Rumble shares with a nearly 8% stake, meaning it will have the opportunity to use Tether’s investment as exit liquidity. Cantor acted as placement agent and dealer manager for Tether’s Rumble investment, so it will also earn fees from the transaction.

Better still, Rumble’s stock soared after Tether’s investment was made public, meaning Cantor could also sell its shares on the open market and earn significant profits (assuming there are non-Tether buyers interested in this money pit).

This isn’t the first time Tether has invested in a company with which Cantor had a financial stake. In April, Tether invested $30 million in Satellogic Inc., a satellite-building firm that was named in an SEC settlement with Cantor last month for Cantor making misleading statements to investors ahead of certain initial public offerings.

So is this all just coinky-dink, or is Tether looking to keep Lutnick (and other Trump friends) happy in case those DoJ indictments are closer than ever to being unsealed? Either way, Lutnick’s decision to partner with a company that most traditional finance execs wanted nothing to do with has proved profitable, and that’s above and beyond whatever outsized premium Cantor charges to custody Tether’s T-bills.

Are we the goodies? (No)

Lutnick’s (alleged) protection notwithstanding, Tether continues to take small steps to demonstrate its (alleged) newfound commitment to regulatory compliance. On January 2, Tether announced that its T3 Financial Crime Unit (FCU)—a collaboration between Tether, Justin Sun’s Tron network and the TRM Labs blockchain intelligence platform—had frozen $126 million in digital assets suspected of involvement in criminality since FCU’s launch last August.

Tether’s celebrations of its anti-crime activities are quite selective, as it tends to celebrate minor seizures while ignoring far more massive busts. For instance, Tether has yet to issue any statement whatsoever regarding the December 4 announcement by U.K./U.S. authorities about the dismantling of a “multi-billion Russian money laundering network with links to drugs, ransomware and espionage” that relied on USDT “almost exclusively.”

Among the more notable quotes in the FCU presser is Sun’s claim that “if you’re using USDT on TRON for crime, you will be caught.” A year ago, you couldn’t go a month without reading a new report about criminals and terrorists using USDT on Tron, which likely contributed to Sun’s willingness to participate in the odd crackdown here and there, just as rumors of U.S. law enforcement probes into Sun’s activities likely contributed to his decision to spend $30 million buying Trump’s favor.

Which begs the question: will Sun (or Tether?) be so eager to celebrate his own assets being frozen, should all these rumors of his own illicit activities—and FCU’s commitment to cooperating with law enforcement—prove true?

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