Tether CEO Slams EU’s MiCA for Threatening Stablecoin Security

• Stablecoin regulations under the EU’s MiCA are drawing significant criticism.
• The mandate requiring 60% of stablecoin reserves to be held in bank deposits is particularly contentious.
• Tether CEO, Paolo Ardoino, has vocalized several concerns over these stipulations, citing potential risks to stablecoin safety and market access.

A critical look at the EU’s MiCA regulations and their potential impact on the stability and accessibility of stablecoins.

Concerns Highlighted by Tether CEO on MiCA Regulations

Paolo Ardoino, CEO of Tether, has openly criticized the impending Markets in Crypto-Assets (MiCA) regulations. Central to his concerns is the rule obligating stablecoin issuers to maintain 60% of reserves in bank deposits. Ardoino argues that this provision raises serious operational risks, especially given that the European Central Bank insures deposits only up to EUR 100,000, a fraction of Tether’s $110 billion market cap.

The Issue of Bank Deposit Safety

Ardoino points out that the collapse of Silicon Valley Bank exemplifies the fragility of substantial, uninsured bank deposits. He asserts that this requirement could make stablecoins like Tether’s USDT, which are primarily backed by U.S. Treasury notes, more susceptible to financial instability. Tether currently places most of its reserves into short-term U.S. government obligations, offering a safeguard that Ardoino believes is crucial in mitigating potential bank failures.

Binance and the Wider Crypto Community’s Response

In preparation for MiCA, major cryptocurrency exchanges such as Binance, OKX, and Kraken are making strategic adjustments. Binance, for instance, has announced it will restrict the use of unauthorized stablecoins starting June 30th, aligning with MiCA’s enforcement date. The exchange will not delist these stablecoins on their spot markets but will limit their availability on specific products. This maneuver highlights Binance’s commitment to complying with new regulations while minimizing disruptions to their European clientele.

Impact on European Users

Tether’s CEO warns that MiCA’s bank deposit requirements could adversely affect European users by limiting access to stablecoins. Ardoino contends that these regulations might reduce the availability of stablecoins for sophisticated and liquid European investors, thereby jeopardizing their stability and reliability. This, he suggests, represents a significant step backward for the European cryptocurrency market.

Conclusion

Tether’s vocal criticism of the EU’s MiCA regulations underscores the potential risks and operational challenges that could arise from the mandate to hold 60% of stablecoin reserves in bank deposits. As major exchanges like Binance adjust their operations to comply with these rules, the impact on European users remains a key concern. The debate highlights the broader tension between regulatory efforts and the need for stable, accessible digital currencies.