MiCA regulation poses ‘systemic risk’ to banking system, says Tether CEO

Tether CEO Paolo Ardoino has raised concerns that the European Union’s Markets in Crypto-Assets (MiCA) regulation poses a systemic risk not only to stablecoins but also to the broader banking system.

“The problem that I have with MiCA is that instead of making the system more secure, it’s actually creating an incredibly big systemic risk,” Ardoino told Cointelegraph in an exclusive interview. 

The MiCA regulation, which took effect on June 30, imposes stringent limitations on stablecoin operations across the European Economic Area. Notably, it mandates that at least 60% of reserves backing stablecoins must be held in EU bank accounts. 

Ardoino highlighted that financial institutions operate under fractional reserve banking, where only a fraction of deposits are available for withdrawal at any given moment, leaving them vulnerable to bank runs.

He further pointed out that EU cash deposits are insured for only up to $100,000—an amount he argues is inadequate for large stablecoin issuers like Tether.

Ardoino cited the 2023 collapse of the California-based Silicon Valley Bank as a cautionary tale. The bank, which held substantial reserves of USD Coin (USDC), experienced a run that led to the depegging of the stablecoin.

“Silicon Valley Bank went belly up, we all know about that, and our main competitor almost died”, Ardoino explained. “So I think we have a very, very recent example of why that is a bad idea". 

For more insights into Ardoino’s views on stablecoins, check out our full interview.