Europe’s forthcoming regulatory framework will introduce banking concerns for stablecoin issuers that could threaten the stability of the broader crypto space, according to Paulo Ardoino.
The Markets in Crypto-Assets Regulation (MiCA) is the first comprehensive regulatory framework for the crypto industry and is set to go into full effect on 30 December. Under MiCA, stablecoin issuers will be required to hold at least 60% of reserve assets in European banks, reports Cointelegraph.
Considering that banks can loan up to 90% of their reserves, this may introduce “systemic risks” for stablecoin issuers, according to Ardoino, CEO of Tether — the issuer of the world’s largest stablecoin, USDt, which recently surpassed $120 billion in market capitalization.
Ardoino shared his concerns during an interview at Plan B Lugano in Switzerland:
“If you have 10 billion euros under management, you have to put 6 billion euros in cash deposits. That is 60% of 10 billion euros. We know that banks can lend out 90% of their balance sheet. So of the 6 billion euros, they lend out 5.4 billion euros to people […] 600 million euros will remain in the bank balance sheet.”
Some of the most notable stablecoin issuers have faced bank-related issues in the past. In March 2023, Circle’s USD Coin — the world’s second-largest stablecoin — lost its dollar peg, falling as low as $0.8774.
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