Stablecoin Issuer Tether CEO Criticizes EU’s New Crypto Regulations
Paolo Ardoino, the CEO of stablecoin issuing company Tether, has criticized the European Union’s new cryptocurrency regulations, warning that they could force stablecoin issuers to rely on unstable banks. He cautioned that the interaction between high-risk lending and the new regulations could lead to a wave of bank failures in Europe in the near future.
In an interview on the “Less Noise More Signal” program, Ardoino condemned the EU’s regulatory framework for stablecoins, stating that the regulations may compel companies like Tether to park a significant portion of their reserves (up to 60%) in uninsured cash accounts at small European banks.
He provided an example, explaining that if a stablecoin were issued with a scale of 10 billion euros, it might imply that the company would have to deposit 6 billion euros in riskier small banks, which have a deposit insurance cap of only 100,000 euros. He described the situation by saying that having 1 billion euros in deposits would be like “a drop in the bucket.”
Ardoino further added that European banks, like others around the world, operate on a fractional reserve basis, “they can lend out 90% of it to those looking to buy homes or start businesses.” In his hypothetical case of 6 billion euros, this means banks could lend out 5.4 billion euros, and if there were a 20% redemption demand, it could lead to a funding shortfall of billions of euros. He likened this to the scenario during the collapse of Silicon Valley Bank in 2023.
He pointed out that the regulatory design in Europe aims to provide liquidity to banks in the region, but it creates “massive systemic risk.” Major European banks like UBS do not offer banking services for stablecoins, forcing issuers to rely solely on smaller banks, which further increases the risk.
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