Crypto: The MiCA Regulation Could Trigger a Banking Crisis in Europe!

Europe positions itself as a global leader in the regulation of cryptos, with the recent adoption of the MiCA regulation. Yet, behind this ambitious project lies a worrying paradox: this legislative framework, supposed to stabilize the market, could actually weaken the very foundations of the banking system. This is the warning issued by Paolo Ardoino, CEO of Tether, who sees these new rules as a threat not only to stablecoin issuers but also to all European financial institutions.

The Concerns of Tether’s CEO: An Imminent Systemic Risk

Paolo Ardoino, CEO of Tether, has expressed severe concerns about the potential repercussions of the MiCA regulation, recently adopted by the European Union. In an exclusive interview, he emphasized that far from enhancing the security of the crypto market, this legislation could instead exacerbate the vulnerabilities of the banking system. According to Ardoino, the requirement for stablecoin issuers to hold 60% of their reserves in European banks creates a major risk. He recalls that these financial institutions, operating on a fractional reserve system, are inherently exposed to bank run risks, a danger amplified by the requirements imposed by MiCA.

Ardoino also highlighted a critical shortcoming of the regulation: the deposit guarantee limit of $100,000 within the European Union. For actors the size of Tether, this protection is trivial and could prove catastrophic in the event of a crisis.

A Warning: The Case of Silicon Valley Bank

Paolo Ardoino refers to concrete events, notably the collapse of Silicon Valley Bank in 2023, to illustrate the real dangers that could be generated by this new legislation. The failure of this bank, which held significant reserves of USD Coin, not only triggered a bank run but also led to a de-pegging of the stablecoin, creating a shockwave across the entire crypto market. Ardoino warns that the crypto market regulation could replicate this scenario in Europe, as it imposes conditions on stablecoin issuers that expose them directly to the fragilities of the banking system.

For Ardoino, the situation is clear: by forcing stablecoins to rely more on European banking institutions, MiCA could create a similar, if not more destructive, cycle in the event of a European bank failure. According to him, the crypto market regulation, though driven by a commendable intention, does not sufficiently take into account the lessons learned from recent financial crises, thereby exposing the European financial system to unprecedented potential risks.

Before moving forward, it is imperative that European regulators reassess the implications of these new rules to ensure that they effectively enhance the resilience of the financial system, rather than increasing its fragility.