ECB Backs Tether on MiCA Reserve Rule Critique, Recommends Changes
Tether's CEO Paolo Ardoino has reiterated the company's stance on not seeking European Union authorization for its stablecoin USDT under the Markets in Crypto-Assets (MiCA) regulation. The reason behind this decision is the bank-deposit requirement, which forces a significant portion of USDT's reserves to be placed with commercial banks.
Ardoino argues that placing reserves with banks creates additional banking risk for Tether's global users. He claims that bank deposits are not equivalent to immediately available cash and can pose liquidity or counterparty risks during large redemption events.
The European Central Bank (ECB) has now recommended eliminating MiCA's mandatory minimum bank-deposit requirement for stablecoin reserves, favoring liquidity requirements instead. The ECB's concern is that requiring issuers to place large reserves in commercial banks could lead to systemic risks and potentially transmit stress into the banking system.
The proposal does not mean the existing regulations have changed yet, but it's a significant development for Tether as European central banks are now asking policymakers to reconsider the part of the framework that the company has been criticizing. Whether this changes Tether's decision remains unresolved.