As Banking Risks Mount, Tether CEO Dismisses EU Protections as Futile: ‘Like Spitting on a Fire’

Tether’s CEO, Paolo Ardoino, has raised concerns about the European Union’s new regulatory framework for stablecoins, cautioning that it could create significant systemic risks for both crypto issuers and traditional banks. In a recent interview on the Less Noise More Signal podcast, Ardoino highlighted the potential dangers of forcing stablecoin issuers to deposit a substantial portion of their reserves in bank accounts without sufficient insurance coverage.

Under the EU rules, stablecoin issuers could be required to allocate up to 60% of their reserves in deposits with small, often uninsured banks. According to Ardoino, this exposes the system to significant risk. “If you park €6 billion in small banks that only have €100,000 in deposit insurance, it’s like spitting on a fire. It’s simply not enough protection,” he said.

Ardoino further explained that in a fractional reserve banking system, banks lend out most of their deposits. As such, the reserves held by smaller banks may not be readily available for withdrawal during a liquidity crisis. In the event of a 20% redemption run, this could trigger a massive collapse of the banking system, taking down stablecoin issuers in the process.

“This situation isn’t about stablecoins failing due to mismanagement, it’s about the fragile banking system behind them,” Ardoino warned. He argued that such a scenario would lead to further skepticism about the viability of stablecoins, even though the root cause lies in the banking infrastructure.

The Tether CEO also expressed frustration with the limited number of large institutions willing to bank crypto firms. He noted that major players like UBS typically refuse to work with stablecoin providers, leaving them with riskier options.

While warning of potential regulatory overreach, Ardoino also discussed Tether’s ongoing expansion into real-world assets, including an upcoming U.S.-based stablecoin product and increased investments in the Latin American agricultural sector through its stake in Adecoagro.