Regulation
Tether CEO Slams Bank Deposit Requirement for Stablecoins
Tether CEO Paolo Ardoino criticized upcoming crypto-asset markets (Mica), notably contesting the rule requiring stablecoin issuers to hold reserves in bank deposits.
These criticisms come as the cryptocurrency industry prepares for the implementation of these regulations on June 30, which will lead many platforms like Binance to move their operations to Europe.
Tether CEO’s Concerns About MiCA Regulations
Ardoino expressed concerns about how the MiCA provision which requires the reservations of stable coins being 60% bank deposits could complicate and make stablecoin operations riskier. He notes that the European Central Bank, which is the regulator of eurozone banks, has only insured bank deposits up to 100,000 euros, which is negligible compared to the market capitalization of stablecoins such as l ‘USD of Tether, which stands at around $110 billion.
Furthermore, his concerns are based on recent events, notably the failure of Silicon Valley Bank, which demonstrated the vulnerability of large uninsured bank deposits. In response to this, Ardoino draws attention to the possibility of risks this would present for stablecoins like Tether USDT primarily backed by US Treasuries, as opposed to bank deposits, with emphasis on this aspect.
According to Ardoino, in the event of a bank failure, bank deposits are protected by bankruptcy laws, which could be detrimental to stablecoin issuers. However, Tether in particular currently places the majority of its reserves in short-term US government bonds, which are cash equivalents that can be sold immediately. This strategy is useful for the recovery of securities in the event of bank failure and therefore provides higher security.
Responses from Binance and the crypto community
As the deadline approaches, major cryptocurrency exchanges such as Binance, OKX and Kraken are ready to review their products in Europe. For example, Binance revealed that it will limit the use of “unsanctioned” stablecoins starting June 30, which matches the MiCA implementation timeline.
This is in line with the general trend in the crypto space where exchanges are preparing for new rules but doing everything they can to avoid affecting their European customers. Binance’s decision to partially restrict some features rather than completely delist some coins implies the exchange’s flexibility to respond to the changing regulatory environment.
In an interview, the CEO of Tether also noted that the bank deposit requirement under MiCA could impact European stablecoin users. As Ardoino notes, this new regime could make stablecoins less accessible to European users who are generally more sophisticated and liquid, posing a threat to their stability and reliability.
According to him, this is therefore a step backwards for Europe, as it could have a negative impact on the availability and security of stablecoins for European investors and users.
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