Tether CEO Paolo Ardoino warns that Europe’s MiCA regulations on stablecoins could pose systemic risks to banks due to excessive cash reserves requirements.
Paolo Ardoino, the CEO of Tether (USDT), expressed concerns over the new European crypto legislation, MiCA (Markets in Crypto-Assets). He fears it may introduce "systemic risks" to banks.
In an interview with Forbes, Ardoino criticized MiCA’s mandate for stablecoin issuers to hold 60% of their reserves in non-insured cash. He likened it to Circle’s 2023 incident with Silicon Valley Bank, where $3 billion of USD Coin reserves were stuck.
“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,” Ardoino stated.
"Everyone will blame the stablecoins"
Ardoino argued that MiCA’s high reserve requirement could increase risks, not mitigate them. He noted it also restricts trading volumes, which he found less concerning.
“People asked me if I was concerned about the trading restriction. I’m not. It creates a sandbox, which is fine. But a 60% cash deposit requirement increases risk,” he explained.
He suggested that MiCA could lead to European banks facing "systemic risk" due to liquidity pressures from large-scale redemptions. For instance, a $10 billion stablecoin requiring $6 billion in cash deposits might create untenable lending pressures on banks.
Ardoino highlighted a scenario where a $2 billion redemption request could bankrupt a bank with only $600 million in cash reserves. "Everyone will blame the stablecoins," he said, but this demonstrates that such MiCA requirements could pose systemic risks for European banks.
