The CEO of Tether, the company that issues USDT, Paolo Ardoino, spoke to The Big Whale media about various topics relating to the cryptocurrency sector, including European regulation, MiCA. He voiced criticism of European regulators, claiming that Tether would not comply with these new laws, which could result in the removal of their stablecoin from European exchange platforms.
Tether chooses not to regulate in Europe
During Paris Blockchain Week, Paolo Ardoino, CEO of Tether, discussed various hot topics in the cryptocurrency world with The Big Whale media.
During this interview, Paolo Ardoino was particularly pessimistic about the future of companies in the sector within the European Union, strongly criticizing the MiCA law, which will come into force in June 2024.
For him, MiCA is an overly strict regulation that attempts to curb the adoption of dollar stablecoins in Europe, taking “the risk of stifling innovation” and hindering new services developed on blockchain infrastructures.
Paolo indicated that Tether could choose not to comply with European Union regulations due to the overly stringent constraints imposed by MiCA. This decision could force European exchanges to withdraw USDT from their platforms.
Indeed, the legislation requires stablecoin issuers to keep 60% of their reserves in liquid form in a bank account.
He points out that this requirement considerably reduces repayment flexibility for his customers and generates an additional risk: that of bank failure.
If a bank holding a significant proportion of reserves were to fail, Tether would risk losing a portion of its funds, whereas allocating the majority of its reserves in bonds is deemed safer and reduces the risk of losing funds.
In addition, MiCA requires reserves to be allocated between 6 and 12 banks, depending on the total amount of funds. Paolo Ardoino points out that it’s already difficult to find a bank in Europe that accepts companies in the cryptocurrency sector, so finding between 6 and 12 banks that allow it seems virtually impossible.
Following publication of the interview, the CEO was keen to correct his claims in a post on social network X.
Just to correct the statement: we’re still discussing with the regulator about our concerns that I expressed in our interview, that would pose severe risks to stablecoins regulated in EU.
Uninsured cash deposits are not a good idea.
We should learn from what happened with…
– Paolo Ardoino (@paoloardoino) April 11, 2024
“To correct the statement: we are still discussing with the regulator our concerns that I expressed during our interview, which would pose serious risks for regulated stablecoins in the EU. [We should learn from what happened with Silicon Valley Bank and another major stablecoin in the US. If a bank goes bankrupt, uninsured cash goes bankrupt. “
Here, Tether’s CEO corrects his statements and says that Tether continues to discuss with European regulators. He also stresses that maintaining a large share of cash reserves in banks is very risky.
He cites the example of the USDC, which in March 2023 underwent decorrelation against the dollar following uncertainty over the future of Circle’s funds. The funds were held in an account at Silicon Valley Bank, which had declared bankruptcy.
