EU’s MiCA regulation puts stablecoins at risk

Tether CEO Paolo Ardoino believes that MiCA’s latest regulatory move puts banking systems and the use of stablecoins in the EU at “systemic risk.”

In a recent interview with Cointelegraph, Ardoino shared his concerns regarding the MiCA regulation, which came into effect on June 30. You can see it below.

The newly enacted law requires EU-based stablecoin issuers to hold at least 60 percent of their reserves in EU-based bank accounts.

The CEO stressed that the regulation could be problematic because EU cash deposits over €100,000 are not insured, a relatively small amount for stablecoins like Tether (USDT). He argued that the restrictions could lead to problems similar to those experienced during the collapse of Silicon Valley Bank in 2023.

They had $3.3 billion in cash deposits in Silicon Valley Bank. Silicon Valley Bank went bankrupt. We all know that.

Tether CEO Paulo Ardoino

He warned that such requirements could endanger stablecoins and exacerbate weaknesses in the banking sector.

The CEO explained how financial institutions operate with a fractional reserve banking system, where only a small portion of deposited funds are available for withdrawal at a time. In the event of a surge in withdrawal demand, banks will likely become highly susceptible to conditions that could lead to financial instability.

Ardoino criticized the MiCA regulation, arguing that it introduced significant system risks rather than improving system security.

The Tether CEO was also asked about Republican US presidential candidate Donald Trump’s plan to create a strategic Bitcoin reserve for the US if he is elected. He expressed strong support, noting that central banks, particularly in Asia, are increasing their gold reserves.

He showed that Bitcoin offers superior advantages over gold, but is less “understood.” According to Ardoino, Bitcoin is a currency governed by objective mathematical principles, not human trust, making it a valuable asset for national reserves.

He also believes that if the US were to start acquiring and holding Bitcoin as a reserve asset, it would set an important precedent and encourage other countries to do the same.

However, other crypto experts have argued against creating a Bitcoin reserve, citing Bitcoin’s volatility.

Ardoino also noted that Tether holds a portion of its reserves and profits in Bitcoin. He suggested that if the U.S. were to adopt a strategic Bitcoin reserve, it would validate Tether’s strategy and confirm that its approach to including Bitcoin in its portfolio was “right from the start.”

You can find the full interview below.