Tether CEO Paolo Ardoino has issued a stark warning about Europe’s financial landscape, suggesting that the continent may be on the brink of a wave of bank failures. The culprit? A volatile mix of risky lending practices and stringent new cryptocurrency regulations. During a candid conversation on the Less Noise More Signal podcast, Ardoino expressed deep concerns over the European Union’s regulatory framework for stablecoins, which he claims forces companies like Tether to maintain a significant portion of their reserves—up to 60%—in uninsured bank deposits.
Uninsured Deposits: A Recipe for Disaster?
Ardoino’s critique zeroed in on the EU mandate that could potentially see Tether holding 6 billion euros of a 10 billion euros-pegged stablecoin in smaller banks with only minimal protection. “The bank insurance in Europe is only 100,000 euros,” he explained. “If you have 1 billion euros, that’s like spitting on a fire.” In other words, the safety net is alarmingly flimsy given the scale of potential losses.
European banks, like their global counterparts, operate on a fractional reserve model—meaning they lend out most of the money deposited with them. In Ardoino’s scenario, this setup could result in 5.4 billion euros being lent out from a 6 billion euros reserve. The parallels to the Silicon Valley Bank collapse in 2023 are unmistakable, with Ardoino pointing out that a similar rush for redemptions could expose a dangerous liquidity gap.
Regulatory Quagmire or Safety Net?
Ardoino didn’t mince words when discussing the EU’s regulatory intentions. Although ostensibly designed to bolster bank liquidity within the bloc, these rules could inadvertently exacerbate systemic risks. “As a stablecoin issuer, you go bankrupt—not because of you, but because of the bank,” Ardoino stated. The irony is palpable: should a bank collapse, stablecoin issuers might find themselves in the crosshairs, with governments quick to denounce stablecoins as inherently hazardous.
The situation is further complicated by the reluctance of Europe’s largest banks, such as UBS, to engage with stablecoins. This leaves issuers with little choice but to bank with smaller institutions, amplifying the risk. Ardoino’s remarks come at a pivotal moment for Tether, which is gearing up to launch a U.S.-based stablecoin product and has been diversifying its investments—most notably by upping its stake in Latin American agribusiness giant Adecoagro. For more details on this strategic move, see Tether Finalizes Buying 70% of Adecoagro Stake, Securing Tokenization Ambition.
The Road Ahead: Uncertainty and Opportunity
The implications of Ardoino’s comments are profound. For the cryptocurrency sector, these insights highlight the precariousness of current regulatory landscapes and the potential for unforeseen financial disruptions. Analysts are watching closely, noting that while Tether’s expansion plans signal confidence, the underlying banking risks could pose significant hurdles. This follows a pattern of strategic positioning in the stablecoin market, as explored in Ripple Offered $4B-$5B for Stablecoin Issuer Circle: Bloomberg.
Yet, amid the looming challenges, opportunities abound. As Tether ventures into new markets and broadens its investment portfolio, the company seems poised to weather the storm—albeit with eyes wide open to the potential pitfalls. The broader cryptocurrency community will undoubtedly follow Tether’s maneuvers closely, keen to see how the stablecoin giant navigates these turbulent waters.
Looking forward, the key question remains: Can Europe reconcile its regulatory ambitions with the dynamic realities of the cryptocurrency world? The answer will likely shape the trajectory of stablecoins not just in Europe, but globally. As Ardoino’s observations remind us, the stakes are high, and the path forward is anything but straightforward. But then again, in the world of crypto, when is it ever?
Source
This article is based on: ‘Like Spitting on a Fire’: Tether CEO Slams EU Deposit Protections Amid Bank Failure Warnings
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
