Regulation
Why the MiCA regulation alarms Tether’s CEO
9.49am ▪ 3 minute read ▪ by Luc Jose A.
The MiCA regulation, which is scheduled to come into force on December 30, 2024, is already shaking the cryptocurrency industry in Europe. The new requirements raise many questions among stablecoin issuers. Paolo Ardoino, CEO of Tether, recently shared his concerns, hinting at the major challenges ahead for the sector.
Tether faced with new MiCA regulations in Europe
Last Monday, Cryptocurrency exchange Binance has announced that it will begin restricting access to “unauthorized” stablecoins. in Europe from June 30th. This decision is a direct response to the requirements of the MiCA regulation, which imposes strict obligations on stablecoin issuers. Paolo Ardoino spoke out his concerns regarding these rules.
Tether’s CEO said that these obligations could not only make the business of stablecoin issuers very complex, but could also make these regulated cryptocurrencies extremely vulnerable and risky. He highlighted that the regulatory constraints imposed by MiCA could create significant operational challenges, affecting the flexibility and security of stablecoin issuers. Paolo Ardoino also warned about the potential effects of these regulations on the stability and reliability of stablecoins, suggesting that adjustments are needed to avoid an increase in risks in the sector.
Capital reserves: a big challenge
Capital reserves meant to support USDT are a big problem for Tether’s CEO. According to the new MiCA regulation requirements, all stablecoins must be backed at a 1:1 ratio, exclusively in cash. Paolo Ardoino strongly criticizes this requirement, stating that unsecured cash deposits represent an inappropriate and potentially dangerous solution for the financial stability of this class of cryptocurrencies.
He argues that this approach exposes stablecoins to risks similar to those faced by Silicon Valley Bank. He proposes that these cryptocurrencies be allowed to keep 100% of their reserves in Treasury bills, an alternative he sees as safer and more stable. “Unsecured cash deposits are not a good idea. We should learn from what happened with Silicon Valley Bank. Stablecoins should be able to keep 100% of their reserves in Treasury bills, instead of exposing themselves to bank failures,” he said.
The implementation of the MiCA regulation forces stablecoin issuers to rethink their reserve strategy. The approach proposed by Ardoino highlights the need to review these regulations to ensure financial stability without compromising the security of these cryptocurrency issuers. It remains to be seen whether his proposals will be listened to by European legislators.
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Luc Jose A.
Graduated in Science Po Tolosa and holder of a blockchain certification consultant issued by Alyra, I returned to participate in Cointribune in 2019. Capturing the potential of blockchain to transform numerous sectors of the economy, I have made a commitment to raise awareness and inform the great public about this constantly evolving ecosystem. My goal is to allow anyone to better understand blockchain and learn about the opportunities it offers. I strive every day to provide an objective analysis of current events, to decipher market trends, to convey the latest technological innovations and to put into perspective the economic and social efforts of this revolution in brands.
DISCLAIMER
The views, thoughts and opinions expressed in this article are solely those of the author and should not be relied upon as investment advice. Do your research before making any investment decisions.