Tether CEO Warns of Bank Failures Due to EU Deposit Protections
Tether CEO Paolo Ardoino warns of potential bank failures in Europe due to risky lending practices and new cryptocurrency regulations. Key points include:
- EU's rules for stablecoins may force companies like Tether to keep up to 60% of reserves in uninsured bank deposits.
- This could result in holding 6 billion euros of a 10 billion euro-pegged stablecoin in small banks with limited insurance coverage.
- European bank insurance caps at 100,000 euros; large amounts would be highly exposed.
- European banks operate on fractional reserves, potentially lending out significant portions of deposits.
- Ardoino likens the situation to the conditions leading to Silicon Valley Bank's collapse in 2023, citing liquidity mismatches.
- A 20% redemption event could leave banks short billions, impacting stablecoin issuers.
- Regulations favor banks but create systemic risks, as major banks like UBS avoid partnering with stablecoins.
Tether is also planning a U.S.-based stablecoin product and has increased its investment in Adecoagro.