Originally published on: October 28, 2024
The upcoming regulatory framework in Europe, known as the Markets in Crypto-Assets Regulation (MiCA), is set to bring significant challenges for stablecoin issuers. According to Tether CEO Paulo Ardoino, these new rules could introduce “systemic” banking risks that may impact the stability of the entire cryptocurrency space.
One of the key provisions under MiCA requires stablecoin issuers to hold a minimum of 60% of reserve assets in European banks. However, Ardoino highlights a potential concern as banks have the ability to loan up to 90% of their reserves, raising worries about the overall stability of stablecoins.
During an interview at Plan B Lugano in Switzerland, Ardoino shared his insights with Cointelegraph, expressing his concerns about the implications of these new regulations on stablecoin issuers. This comes at a time when Tether’s stablecoin, USDT, has surpassed $120 billion in market capitalization.
Stablecoin issuers have faced challenges in the past when dealing with banks. For example, Circle’s USD Coin experienced a depegging issue in March 2023 after facing difficulties withdrawing reserves from a bank. Ardoino suggests that under the MiCA regime, stablecoin issuers can protect themselves against such risks by utilizing securities.
As the December 30 full implementation date of MiCA approaches, major financial institutions like Societe Generale are already making moves to comply with the new regulations. This includes partnerships to launch MiCA-compliant stablecoins such as the euro-denominated EUR CoinVertible.
While Tether’s CEO is not the only one expressing concerns about the impact of MiCA rules, regulatory compliance experts fear a potential exodus of companies from Europe. Despite these challenges, crypto firms like Kraken are actively preparing for MiCA by expanding their presence in the region.
As the crypto industry navigates these new regulations, the future of stablecoins and their role in the broader financial landscape remains uncertain. Stay tuned for more updates on how stablecoin issuers are adapting to the changing regulatory environment.
