Tether CEO, Paolo Ardoino opposes MiCA regulations, especially the mandate for stablecoin issuers to hold 60% of reserves in bank deposits.
Paolo Ardoino, the Chief Executive Officer of Tether, has voiced his disapproval of the forthcoming Markets in Crypto-Assets (MiCA) regulations. In particular, he has taken issue with the legislation that mandates stablecoin issuers to keep their reserves in bank accounts.
This criticism comes at a time when the cryptocurrency sector is getting ready to implement these restrictions on June 30th, which has resulted in numerous platforms, including Binance, moving their operations to Europe before the deadline.
Tether CEO’s Concerns with MiCA’s Regulations
Concerns have been raised by Tether CEO Ardoino regarding the MICA clause, which mandates that the reserves of stablecoins must consist of sixty percent bank deposits. This regulation has the potential to make the operations of stablecoins more complicated and risky. Tether CEO, Paolo Ardoino points out that the European Central Bank, which is the supervisor of the banks in the Euro area, only accepts insured bank deposits up to a maximum of one hundred thousand euros.
This amount is insignificant when compared to the market capitalization of stablecoins such as Tether’s USDt, which is over one hundred ten billion dollars. Furthermore, recent events like Silicon Valley Bank’s failure underscore the vulnerability of large deposits in uninsured banks.
In response to this, Tether CEO, Paolo Ardoino highlights the potential risks for stablecoins like Tether’s USDT, which primarily rely on U.S. Treasury notes instead of bank deposits. We accomplish this by broadening the focus to include this particular feature. According to Ardoino, if a bank fails, the bankruptcy laws will protect bank deposits.
This might be problematic for stablecoin issuers because bank deposits are protected by bankruptcy regulations. However, Tether, in particular, is now investing the majority of its reserves in short-term U.S. government liabilities. Tether holds these obligations for a limited period of time and can sell them immediately.
This technique is advantageous for the recovery of securities in the event that a bank fails, and as a result, it provides a higher level of security. As the deadline draws near, prominent cryptocurrency exchanges in Europe, including Binance, OKX, and Kraken, are planning to conduct product reviews of their respective offerings.
Binance, for example, has announced that it will begin restricting the use of ‘unauthorized’ stablecoins on June 30th, which coincides with the timetable that MiCA has set for its deployment. This is consistent with the broader trend in the cryptocurrency market, which is that exchanges are preparing for new legislation while doing everything in their power to avoid those rules having an impact on their European customers.
Binance’s decision to partially restrict certain functionalities instead of completely delisting specific coins demonstrates its flexibility in adapting to the ever-changing legal environment.Additionally, the Tether CEO, Paolo Ardoino stated in an interview that MiCA’s bank deposit requirement might potentially impact stablecoin users in Europe.
According to Ardoino, this new regime may make stablecoins less accessible to European consumers, who are often more sophisticated and liquid. This poses a risk to the stability and dependability of stablecoins. Consequently, he believes that this is a move in the wrong direction for Europe because it has the potential to have a detrimental influence on the availability and security of stablecoins for investors and users coming from Europe.