Tether CEO Paolo Ardoino has sharply criticized the European Union’s regulatory stance on stablecoins, warning that it could expose issuers to substantial banking risks, potentially triggering a financial collapse similar to the 2023 Silicon Valley Bank crisis.
In a recent interview on the Less Noise More Signal podcast, Ardoino emphasized the EU’s requirement that stablecoin issuers must allocate up to 60% of their reserves in small, uninsured bank deposits. According to Ardoino, this creates a dangerous mismatch. “If you deposit €6 billion in a bank with only €100,000 in insurance coverage, it’s like spitting on a fire,” he remarked, referring to the vulnerability of such a system in the event of a financial meltdown.
The concern centers on the inherent risk of the fractional reserve banking system, where most deposited funds are lent out, leaving only a fraction available for withdrawal. Ardoino pointed out that this structure could lead to a liquidity crunch if even a small percentage of customers or investors demand to redeem their funds at once. In this scenario, he argued, the stablecoin issuer would be the first to be blamed, even though the failure originates from systemic weaknesses within the banking system.
“The EU’s approach isn’t designed to protect stablecoins,” Ardoino argued. “It’s about protecting European banks, which are increasingly unwilling to work with stablecoin issuers. But this approach leaves issuers exposed to a cascading banking crisis.”
While discussing potential alternatives, Ardoino reiterated Tether’s commitment to expanding its product offerings outside of the crypto market, including an upcoming U.S.-based stablecoin initiative and investments in the real economy. Recently, Tether increased its stake in Adecoagro, a Latin American agribusiness, signaling its broader diversification strategy.
