Saturday, August 10, 2024 ▪ 3 min read ▪ Author: Luc Jose A.
Europe recently adopted the MiCA regulation, establishing itself as a global leader in cryptocurrency regulation. However, behind this ambitious project lurks a worrying contradiction: this legislative framework aimed at stabilizing the market could actually weaken the very foundations of the banking system. This is the warning issued by Tether CEO Paolo Ardoino, who believes that these new rules are a threat not only to stablecoin issuers, but to European financial institutions as a whole.
Tether CEO worries about imminent systemic risk
Tether CEO Paolo Ardoino expressed serious concerns about the potential impact of the European Union's recently adopted MiCA regulation. In an exclusive interview, he stressed that rather than strengthening the security of the cryptocurrency market, the law could exacerbate vulnerabilities in the banking system. According to Ardoino, the requirement that stablecoin issuers deposit 60% of their reserves in European banks creates significant risks. He noted that these financial institutions operating under a fractional reserve system are inherently exposed to bank run risks, which are further aggravated by the requirements imposed by MiCA.
Ardoino also pointed to the $100,000 deposit guarantee limit within the European Union as a major drawback of the regulation, which he said is “insignificant for a company the size of Tether and could have dire consequences in the event of a crisis.”
Warning: The Silicon Valley Bank story
Paolo Ardoino explains the real dangers that this new law could pose by citing concrete events such as the collapse of the Silicon Valley Bank in 2023. The collapse of this bank, which held significant reserves of USD Coin, not only triggered a bank run but also triggered the de-pegging of stablecoins, sending shock waves through the entire cryptocurrency market. Ardoino warns that this scenario could be replicated in Europe, as regulation of the cryptocurrency market would impose conditions on stablecoin issuers that would directly expose them to the vulnerabilities of the banking system.
For Ardoino, the picture is clear: by forcing stablecoins to become even more reliant on European banking institutions, MiCA could set off a similar, or even more destructive, chain reaction in the event of a European bank failure. He said that while crypto market regulation is driven by laudable intentions, it has not fully taken into account lessons learned from the recent financial crisis, exposing the European financial system to unprecedented potential risks.
Before moving forward, it is essential that European regulators reassess the impact of these new rules to ensure that they actually make the financial system more resilient, rather than making it more fragile.
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Join the Read to Earn program. Luc Jose A.
Blockchain Exam of Toulouse Science Diplome and Certification Consultant Alira, rejoined in 2019 Coin Tribune. We consider the possibilities of blockchain in the field of economics, to communicate to the masses the evolution of social systems and constants that study economics, providing sensitivity and information. The month aims to understand blockchain and its opportunities. We analyze the objectives of reality, decrypt the trends of the Marche, analyze the perspectives of innovation technologies and points of view, and analyze the social revolution of the Marche.
Disclaimer
The views, thoughts and opinions expressed in this article are those of the author and should not be taken as investment advice. Please conduct your own research before making any investment decisions.
