Paolo Ardoino, CEO of stablecoin issuer Tether, criticized the EU's new cryptocurrency regulations, which may force stablecoin issuers to rely on unstable banks. He warned that due to the interaction of high-risk lending and new regulations, Europe could face a wave of bank failures in the near future.

Ardoino criticized the EU's regulatory framework for stablecoins during an interview with (Less Noise More Signal), stating that the regulations could force companies like Tether to keep most of their reserve funds (up to 60%) in uninsured cash accounts at small banks in Europe.

He gave an example that if the issuance scale is 10 billion euros for stablecoins, it might mean the company needs to deposit 6 billion euros in higher-risk small banks, where the deposit insurance limit for these European banks is only 100,000 euros. He described that if you have 1 billion euros in deposits, it’s like 'a drop in the bucket.'

Ardoino added that European banks, like those globally, operate under a fractional reserve system, 'they can lend out 90% of it to those wanting to buy homes or start businesses.' In his hypothetical case of 6 billion euros, this means banks might lend out 5.4 billion euros, which could lead to a shortage of billions of euros if faced with a 20% redemption demand. He likened this to the situation during the collapse of Silicon Valley Bank in 2023.

Ardoino stated: 'As a stablecoin issuer, you will go bankrupt—not because of you, but because the bank failed. Therefore, when the bank goes bankrupt, you will also go bankrupt, and then the government will say: 'I told you so, stablecoins are very dangerous.'

He pointed out that the regulatory design in Europe is meant to help banks within the region bring liquidity, but it creates 'enormous systemic risk.' Large European banks like UBS do not provide banking services for stablecoins, forcing issuers to rely on smaller banks, which further increases risk.

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Related reports: (Is USDT in trouble? European regulators call for accelerated restrictions on stablecoins that do not comply with MiCA regulations)(Insiders: Kraken and Crypto.com plan to issue stablecoins to fill the gap in the European market)

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