MiCA is Very Dangerous for Stablecoins, warns Tether CEO

by Sylvester Iyere

Paolo Ardoino, CEO of Tether, defended the company’s decision not to seek registration under the European Union’s Markets in Crypto-Assets (MiCA) framework. Ardoino cites concerns over the regulations’ potential impact on stablecoins and the European banking system. This was revealed in a Cointelegraph interview at the Token2049 conference in Dubai.

Ardoino’s comments come as the EU begins to implement MiCA requirements, which have already led to several major crypto exchanges delisting stablecoins, including Tether’s USDT. According to Ardoino, the regulations pose significant risks to stablecoins and could even destabilize Europe’s small and medium-sized banks.

“MiCA license is very dangerous when it comes to stablecoins, and I believe that is even more dangerous for the small, medium banking system in Europe,” Ardoino warned. “Banks in the region could ‘go belly up’ in the next few years thanks to MiCA’s requirements, such as keeping 60% of stablecoins reserves in insured cash deposits in European banks.”

Tether’s Desire to Put Its Over 400million Users First, says Ardoino

The Tether CEO’s decision to forego MiCA registration has sparked debate within the crypto community, with some questioning the potential consequences for USDT’s users in Europe.

However, Ardoino emphasized that his primary concern is protecting Tether’s over 400 million users worldwide.

“I decided not to apply for the MiCA license because I need to protect the 400 million+ users that we have around the world,” Ardoino said. “They are not as lucky as Europeans. I love Europe, but I think that unfortunately, the European Central Bank is more interested [in pushing] the digital euro as a way to control people and control how they spend their money.”

The Trend of Nations Establishing Crypto Reserves

Ardoino’s comments also touched on the growing trend of nations establishing crypto reserves. He believes that countries’ efforts to accumulate Bitcoin are “just inevitable” and that increased Bitcoin education will drive more companies to follow suit.

“In the medium to long term, the more Bitcoin education, the more companies will set the example […] then everyone else will follow,” Ardoino said. “It’s never too late to buy Bitcoin.”

Tether’s significant exposure to US Treasurys, recently announced at around $120 billion, further underscores the company’s growing influence in traditional financial markets. With USDT’s market capitalization standing at approximately $149 billion, Ardoino’s remarks highlight the complex regulatory landscape facing stablecoin issuers and the need for nuanced approaches to compliance.

Comparative Analysis of Tether (USDT) and Circle (USDC)

Tether and Circle are two prominent stablecoin issuers with apparently distinct approaches to market penetration and regulatory compliance.

Market Liquidity vs Regulatory Compliance

Tether’s market liquidity approach: Tether’s strategy appears to prioritize market adoption and user demand, focusing on providing a widely accepted and highly liquid stablecoin. This approach has enabled USDT to maintain a significant market lead, with a market capitalization of approximately $149 billion. USDT’s widespread adoption can be attributed to its availability on multiple blockchains and its integration with various financial platforms.
Circle’s compliance-first approach: In contrast, Circle’s strategy often appears to emphasize regulatory compliance and partnerships with licensed financial institutions. USDC’s compliance-first approach has led to significant growth, with a 100% increase in circulation year-over-year, reaching a monthly volume of $1 trillion and all-time volume surpassing $21 trillion.

Retail Adoption vs Institutional Adoption

Regarding the impacts of Tether’s and Circle’s distinct approaches above, certain things stand out from both the points of view of adoption and compliance:

Retail Adoption vs Institutional Adoption: Tether’s market-first approach has enabled USDT to become the most widely used stablecoin, particularly in digital asset markets and among retail investors. On the other hand, Circle’s compliance-first strategy has attracted institutional investors and developers seeking regulated and transparent financial solutions. USDC’s partnerships with fintech companies, such as Nubank and Chipper Cash, have also expanded its reach in regions with high demand for digital dollars.
User-first USDC vs MiCA Compliant USDC: In the regulatory environment, USDT’s CEO’s concerns about the regulations’ negative potential impact on stablecoins and the European banking system continue to limit USDT’s adoption in mainstream EU markets. In contrast, the European Union’s MiCA framework has favored USDC, which is MiCA-compliant, potentially impacting USDT’s adoption in the region.

Perhaps, it all comes down to business model and strategy. But as the crypto industry continues to evolve, Tether’s decision on avoiding MiCA registration serves as a catalyst for discussion on the delicate balance between regulatory compliance and innovation in the stablecoin sector.

Discover more from Crypto Asset Buyer

Subscribe to get the latest posts sent to your email.