Paolo Ardoino, the chief executive of USDT issuer Tether, thinks many European banks will “blow up” in the coming years.
In a new interview with Pascal Hügli, Ardoino blasts European Union stablecoin regulations, arguing that they increase systemic risk to the economy rather than doing the opposite.
“So remember, their regulation was pushing us to keep 60% of our reserves in uninsured cash deposits in Europe. So let’s make this simple math calculation, right?
Imagine that you have €10 billion in market cap of your stablecoin in Europe. 60% needs to be kept in uninsured cash deposits in a bank. Uninsured cash deposit means that bank insurance in Europe is only €100,000…
Now, of those €6 billion, you know that European banks – well, all the banks – are doing fractional reserves, so they can lend out 90% of it to people that want to buy a house, that want to start a business, or to public works or whatever.
So €5.4 billion will be lent out by the bank and €600 million will be kept…
So imagine that you have a redemption of 20%, so you need to pay out €2 billion. You go to the bank and you tell the bank, ‘Well, I want €2 billion.’
And the bank says, ‘Well, I only have €600 million.’ 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.”
Ardoino says the regulations are designed to bring liquidity to the banks. He claims that the big financial institutions in Europe won’t bank stablecoins, so stablecoin issuers following EU regulations will be forced to rely on smaller banks with more risk.
According to Ardoino, the setup will lead to a banking crisis in Europe.
“Mark my words, as happened with Silicon Valley Bank, that, by the way, almost killed them in 2023, they will face the same issues. Banks will blow up in the next years also in Europe…
Many banks will blow up in Europe in the next few years.”
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