Crypto-Assets

Tether CEO Paolo #Ardoino has voiced serious concerns over the #European Union’s regulatory approach to stablecoins, warning it could expose the financial system to significant risks and even potential bank failures.In a recent appearance on the Less Noise More Signal podcast, Ardoino criticized new EU rules that could compel stablecoin issuers to store up to 60% of their reserves in uninsured bank deposits—often held at smaller, less resilient financial institutions. “If you have a 10 billion euro-pegged stablecoin, you're talking about placing 6 billion euros in banks that may not be equipped to handle such exposure,” Ardoino said. “And the deposit insurance limit in Europe is just 100,000 euros. It’s like spitting on a fire.
He emphasized that this approach creates a systemic vulnerability. Under the EU’s Markets in #Crypto-Assets (MiCA) regulation, stablecoin issuers are required to hold large portions of their reserves within the banking sector, even though many European banks operate on a fractional-reserve model—only keeping a small percentage of deposits in reserve while lending out the rest.

“In this scenario,” Ardoino explained, “if a bank is holding 6 billion euros of stablecoin reserves, 5.4 billion could be lent out to fund mortgages, business loans, and other investments. That significantly increases counterparty #risk , especially during economic downturns.”

Ardoino’s comments arrive at a time of increasing scrutiny toward both the cryptocurrency and banking sectors in Europe . While the #MiCA regulation is intended to provide consumer protections and stabilize digital assets, critics argue that forcing #crypto companies to rely heavily on traditional banks undermines the very resilience stablecoins are designed to provide.

Tether, which operates the world's most widely used stablecoin USDT, has long maintained a reserve strategy that prioritizes liquidity and safety, often preferring U.S. Treasury bills over uninsured bank deposits. Ardoino suggested that the EU’s stance may need to evolve to reflect the structural risks posed by the current banking model—especially amid rising interest rates, sovereign debt pressures, and geopolitical uncertainty.

“We are not against regulation,” Ardoino clarified. “But regulation should enhance stability, not introduce new systemic risks by forcing capital into fragile parts of the economy.”

As the EU’s crypto regulatory landscape continues to evolve, Ardoino’s warning serves as a stark reminder of the delicate balance between innovation, compliance, and finan
cial security.