Tether Rejects EU MiCA License Over Reserve Requirements

Tether, a major stablecoin issuer, declined to seek a license under the European Union's Markets in Crypto-Assets Regulation (MiCA) due to a requirement that major stablecoin issuers hold 60% of their reserves in bank deposits. The rule was seen as problematic by Tether CEO Paolo Ardoino, who argued it creates additional counterparty risk.

The European Central Bank and national central banks across the EU are now pushing for the removal of this requirement, citing concerns that it could create two-way systemic risk. They argue that large bank deposit requirements could lead to sudden funding pressure on lenders if a stablecoin issuer were to experience a wave of redemptions.

The ECB has proposed focusing on the liquidity of reserve assets instead of fixed 30% and 60% deposit requirements, which would require issuers to hold specified portions of their reserves in assets that can mature or become available within one to five working days. This approach is part of a broader review of the MiCA regulatory framework.

Tether's options for re-entry into the EU market include establishing a separate MiCA-compliant issuer or creating a Europe-specific USDT token, similar to its existing approach with USAT in the United States. Circle, another major stablecoin issuer, could benefit from any reserve requirement reduction under a revised framework.