The CEO of Tether, Paolo Ardoino, rings the alarm on the European financial system, warning that a wave of bank failures could strike the continent in the near future due to the intersection of risky loans and new cryptocurrency rules.
Ardoino, during an interview with the podcast less noise signal, targeted the regulatory framework of the European Union for Stablecoins, which, according to him, pushes companies like Tether to maintain most of their reserves – up to 60% – in uninsured bank deposits.
In its scenario, this could mean holding 6 billion euros of 10 billion euros perplexity with small banks with minimum protection. “Banking insurance in Europe is only 100,000 euros,” he said. “If you have 1 billion euros, it’s like spitting on a fire.”
European banks, like all other banks, operate on a split reserve, added Ardoino. “They can lend 90% to people who want to buy a house, start a business and all this.” In its hypothetical scenario of 6 billion euros, this would mean that 5.4 billion euros would be loaned by the bank.
He compared the configuration to the complication of the collapse of Silicon Valley Bank in 2023, when a flow of redemptions revealed the inadequacy between deposits and real liquidity. Ardoino has warned that European banks operate under similar fractional reserve models which could crash under pressure. A 20%buyout event, he said, could leave banks in the short term.
“As a stablecoin issuer, you go bankrupt – not because of you, but because of the bank. So the bank goes bankrupt and you go bankrupt, and the government would say:” You said that the stablecoins are very dangerous, “said Ardoino.
The regulations in Europe, he added, are made to try to help the Bloc banks and bring them liquidity, but that has created a “huge systemic risk”. The biggest banks in Europe, like UBS, “would not be in the stabbed bench”, pushing the stablecoin issuers to use small banks, promoting risk.
The comments come while Tether plans to launch a stablecoin product based in the United States, and as a stablecoin issuer continues to invest in various projects outside the ecosystem, after recently increased its participation in the Latin American producer Adecoagro.
