Tether CEO Paolo Ardoino has expressed serious concerns about the potential impact of the European Union’s newly implemented Markets in Crypto-Assets (MiCA) regulation, suggesting it could introduce significant risks to both the stablecoin market and the traditional banking system.
In a recent interview, Ardoino argued that the MiCA regulation, which took effect on June 30, may inadvertently create a “systemic risk” rather than enhance the security of financial systems.
His worries centre around the rule that requires stablecoin issuers to hold at least 60% of their reserves in European Union bank accounts.
According to Ardoino, this could expose stablecoin reserves to vulnerabilities inherent in the banking sector.
Ardoino pointed out that traditional banks operate under a fractional reserve system, where only a portion of deposits is kept available for withdrawal at any time.
This model, he warned, leaves banks susceptible to sudden and massive withdrawals, known as bank runs, which could lead to financial instability.
He referenced the 2023 collapse of Silicon Valley Bank as a recent example of how these risks can play out.
The bank’s failure, which was partly due to its significant involvement with USD Coin (USDC), led to a temporary loss of USDC’s value.
Adding to his concerns, Ardoino highlighted that European Union regulations only insure bank deposits up to $100,000—a figure he considers insufficient for large stablecoin issuers like Tether.
He believes that if a major bank holding significant stablecoin reserves were to fail, it could trigger a broader crisis, potentially affecting both the crypto market and the traditional financial system.
