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Tether’s CEO, Paolo Ardoino, has raised alarms about the European Union’s (EU’s) new Market for Crypto Assets (MiCA) regulation, suggesting it might increase systemic risk rather than provide stability.
Implemented on June 30, MiCA imposes stringent rules on stablecoin operations within the European Economic Area. It mandates that at least 60% of the reserves supporting stablecoins be held in EU bank accounts.
Ardoino argues that this could strain financial institutions already working under a fractional reserve banking model, potentially heightening systemic risk.
He criticized MiCA for not enhancing the security of the financial system but rather contributing to its fragility, especially given the limited insurance coverage of cash deposits in the EU, which is capped at $100,000.
Ardoino believes this could jeopardize the stability of large stablecoin issuers like Tether.
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