“The risk of not having access to USDT in Europe is already real”

As the entry into force date of the rules for stablecoins established in the Regulation for the Cryptoasset Market (MiCA) approaches, concern is increasing about what will happen to USDT in the European Union (EU).

Until now, the stablecoin issuing company, Tether, has not complied with the USDT registration requirement in any country in the eurozone and the legislation will come into force on June 30.

Paolo Ardoino, CEO of Tether, was consulted on this topic, who announced the progress in the conversations that, as is known, the company is holding with the region’s regulators.

“Tether has been actively engaged in consultations on regulatory technical standards over the past few months and remains concerned that MiCA contains several problematic requirements,” he explained. But an agreement could not be reached.

Ardoino assures that the company will continue working to find a solution, but, for now, “the risk of not having access to USDT on regulated exchanges in Europe is more than real, given the short time that separates us from the entry into force of these regulations that in a few weeks they will be in force.

The executive insists on pointing out the reasons that led to Tether not to comply with MiCA requirementswhich are based on the registration of stablecoin issuing companies with the bodies authorized by the EU.

“The main problem is that the regulation foresees an enormous risk for the issuers of stable currencies, since they will have to maintain 60% of the reserves in bank deposits,” says Ardoino, adding that such a requirement It is almost impossible to fulfill for Tether.

So remember that bank deposits are only insured up to 100,000 euros by the European Central Bank, a small figure compared to the volume moved by a stablecoin like USDT.

Additionally, bank deposits are subject to the bankruptcy process established in the region, which differs from the mechanism currently used by the company.

Tether currently maintains its reserves in short-term US debt securities, something that makes them similar to cash. This means that they are immediately liquidable for the equivalent value and are protected from problems that arise in the event of bankruptcy or difficulty of the bank depositor.

In addition, “they are always returned to the owner (Tether) in case of problems with the bank,” says Ardoino, noting that this mechanism guarantees having money available in case there is a high volume of refund requests.

As reported by CriptoNoticias, another of the MiCA requirements that are questioned by Tether is the requirement that cash deposits be distributed in, at least, six banking entities. Something complicated in a context in which very few banks accept this type of business in Europe. It’s already very difficult to get just one! said Ardoino.

These requirements could not only make the job of a stablecoin issuer extremely complex, but could also make EU-licensed stablecoins extremely vulnerable and riskier to operate. As with any regulatory framework of this scale, it is crucial to continue discussing technical implementation standards to provide clarity. to the market on certain provisions.

Paolo Ardoino, CEO of Tether.

In this context, the CEO of Tether is committed to continuing negotiations with the region’s regulators, and although everything indicates that the stablecoin will leave the European marketstill thinks that is it possible to find a solution in the future.

“We have been following the regulatory issue in Europe for unsuspected times and since before MiCA was voted by the highest European institutions,” says Ardoino. However, he considers that the approved standards represent a step back for Europe.

Meanwhile, cryptocurrency exchanges are already taking steps to comply with MiCA. Although the majority has not spoken about the situation of USDT, they take action that leave out the stablecoin.

Binance announced the restriction on stablecoin operations that it will begin to classify as “unauthorized,” which will only be available for sale starting June 30. Although the platform did not talk about USDT, the stablecoin enters this list as it is not registered.

The OKX exchange, for its part, decided to eliminate transactions with USDT pairs; and Kraken plans to settle transactions related to dollar-backed stablecoins in euros.

Euro-backed stablecoin stops circulating after failing to comply with MiCA

During his remarks, Ardoino expressed his belief that MiCA will create problems for stablecoin issuers, both large and small.

Such a situation became evident on June 4 with the announcement of the company Lugh, the issuer of a stablecoin backed in euros.

“Due to the upcoming entry into force of MiCA and in accordance with its compliance commitment, the cessation of the issuance of the EURL stablecoin is announced and the reimbursement of existing EURL is guaranteed until August 30, 2024,” he published in X the company based in France.

EURL was launched in 2021, being the first French stablecoin linked to the euro. The market volume of the currency passed about USD 2.8 million last March to USD 34,000 this June 5th.