Originally published on: August 09, 2024
Paolo Ardoino, the CEO of Tether, has expressed serious concerns over the potential systemic risks posed by the European Union’s Markets in Crypto-Assets (MiCA) regulation. In an exclusive interview with Cointelegraph, Ardoino emphasized that MiCA could not only threaten stablecoins but also the broader banking system.
According to Ardoino, rather than enhancing security, MiCA’s restrictions on stablecoin operations could actually create massive systemic risks. The regulation, which came into effect on June 30, includes strict rules such as requiring at least 60% of stablecoin reserves to be held in EU bank accounts.
Ardoino pointed out the vulnerabilities of financial institutions that operate under fractional reserve banking, where only a portion of deposits is available for withdrawal at any time, making them susceptible to bank runs. He also highlighted the fact that EU cash deposits are insured up to a maximum of $100,000, which he believes is inadequate for major stablecoin issuers like Tether.
Drawing on the cautionary tale of the 2023 collapse of Silicon Valley Bank, Ardoino emphasized the risks associated with such regulations. The bank, which held a significant amount of USD Coin (USDC), faced a run that resulted in the stablecoin losing its peg.
Ardoino urged readers to read the full interview for more insights into his perspectives on stablecoins and their future in light of regulatory developments.