Tether Ditches EU License Bid Over Reserve Requirements

Tether, the operator of the popular stablecoin USDT, has abandoned its bid for a European license. The company cited reserve requirements embedded in the EU's crypto asset regulation, MiCA, as the reason for this decision.

MiCA requires major stablecoin issuers to hold at least 60% of their reserves in ordinary bank deposits. However, Paolo Ardoino, CEO of Tether, pointed out that Europe's deposit insurance coverage is capped at just €100,000 (approximately $110,000) in the event of a bank failure.

Ardoino argued that depositing billions of dollars in cash at commercial banks would expose token holders' reserves to risk if a lending institution were to collapse. This concern is shared by the European Central Bank and central banks of all 27 EU member states, which have also voiced opposition to the provision.

The central banks proposed instead requiring token issuers to hold liquid assets payable within one to five days. This change would prevent a sudden bank run if crypto markets were to shift abruptly. Despite this shared concern, Tether and the central banks reached opposite conclusions, one citing risk exposure for users, the other seeking to protect local banks.