Tether CEO warns MiCA stablecoin rules could pose ‘systemic risks’ to EU banks
The post Tether CEO warns MiCA stablecoin rules could pose ‘systemic risks’ to EU banks appeared on BitcoinEthereumNews.com.
Tether chief executive Paolo Ardoino is alarmed that Europe’s MiCA regulations on stablecoins, due to excessive cash reserves requirements, could pose systemic risks to banks. Paolo Ardoino, the chief executive of the company behind the largest stablecoin by market capitalization, Tether (USDT), appears to be concerned about the new European crypto legislation, known as MiCA (Markets in Crypto-Assets), saying it could create “systemic risks” for banks. In an interview with Forbes, Ardoino criticized MiCA’s requirement for stablecoin issuers to hold 60% of their reserves in non-insured cash deposits, drawing parallels to Circle’s incident with Silicon Valley Bank in 2023, when over $3 billion of its $40 billion of USD Coin (USDC) reserves were stuck at the collapsed lender. “I don’t want to endanger those 300 million people holding USDT because I have to keep the 60% in uninsured cash deposits in a European bank,” Paolo Ardoino said in the interview. “Everyone will blame the stablecoins” The Tether CEO argued that MiCA’s high reserve requirement could exacerbate risks rather than mitigate them, noting that the regulation also creates “restrictions on how much you can trade or make.” “People asked me if I was concerned about that. I’m not. That is a restriction to protect or create a sandbox, which is fine. That restriction improves or reduces the risk. Conversely, a 60% cash deposit requirement increases the risk,” he explained. Ardoino also addressed the potential pitfalls of the regulation, suggesting that it could lead to a situation where European banks would face a “systemic risk” due to the liquidity pressures imposed by large-scale redemptions. The Tether CEO illustrated this with a scenario where a $10 billion stablecoin must keep $6 billion in cash deposits, allowing banks to lend out 90% of that amount. This would leave only $600 million on their balance…
Filed under: News - @ July 28, 2024 3:22 am