Tether CEO: EU’s MiCA regulation puts stablecoins at risk

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As a seasoned crypto investor with over a decade of experience navigating the ever-evolving digital asset landscape, I find myself in agreement with Tether CEO Paolo Ardoino regarding the recent MiCA regulation. Coming from a background where I’ve witnessed the collapse of financial institutions like Silicon Valley Bank, I can relate to his concerns about the potential systemic risks introduced by this regulation.

According to Tether CEO, Paolo Ardoino, the recent regulatory action taken by MiCA could potentially expose banking systems and stablecoin usage within the EU to a significant “system-wide threat.”

Recently, Ardoino expressed his apprehensions regarding the implementation of the MiCA regulation, which became active on June 30th, in an interview with Cointelegraph. Here’s the gist:

Under the EU’s latest regulations, stablecoin creators must ensure that a minimum of 60% of their reserves are held in bank accounts located within the European Union.

The CEO pointed out potential difficulties with the regulation, as EU cash deposits exceeding €100,000 are not insured – a rather modest amount for companies like Tether (USDT) dealing with stablecoins. He suggested that these constraints could lead to problems reminiscent of those encountered during the 2023 collapse of Silicon Valley Bank.

The Silicon Valley Bank held approximately $3.3 billion in cash reserves. Unfortunately, the bank has closed down, a fact that is widely known.

Tether CEO Paulo Ardoino

As a researcher studying stablecoins, I’ve found that certain requirements could potentially jeopardize their stability and amplify vulnerabilities within the banking sector.

As someone who has worked in the banking industry for over a decade, I can attest to the inner workings of our fractional reserve banking system. This system allows banks to manage their resources efficiently by only holding a small portion of deposited funds readily available for withdrawals. However, it also means that during times of high demand, such as a sudden surge in withdrawal requests, banks become vulnerable to runs, which can lead to financial instability and even failure. I’ve witnessed the consequences of these situations firsthand, and they are far from ideal. It’s essential to understand this aspect of banking to make informed decisions about where to keep one’s money.

As a cryptocurrency investor, I’ve been closely following the discussion around the MiCA regulation. While I understand the intention behind it to supposedly bolster system security, I can’t help but voice my concerns. Instead of enhancing system safety, I believe the MiCA regulation introduces considerable systemic risks that could potentially undermine the very foundation of our digital economy.

The Tether CEO was also asked about Republican U.S. presidential nominee Donald Trump’s plan to create a strategic Bitcoin reserve for the U.S. if elected. He expressed strong support, noting that central banks, particularly in Asia, have increased their gold reserves. 

In simpler terms, Ardoino points out that unlike gold, Bitcoin boasts significant benefits and is based on mathematical rules instead of human confidence. This makes it a potential prized possession for national reserve holdings.

Additionally, he thinks that if the United States began purchasing and storing Bitcoin as a reserve currency, this action could establish a notable precedent, encouraging other nations to do the same.

Other crypto experts, however, have argued against having a Bitcoin reserve, citing its volatility.

Apart from noting that a part of Tether’s reserves and earnings are kept in Bitcoin, Ardoino further expressed that if the United States were to establish a strategic Bitcoin reserve, it would serve as validation for Tether’s strategy and underscore the fact that their decision to incorporate Bitcoin into their portfolio was well-founded all along.

For the full interview, see below.

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2024-08-10 17:08