Tether CEO Paolo Ardoino announced that the company has abandoned its plan to apply for a license to operate in the European Union (EU). Ardoino said the decision is linked to regulations requiring major stablecoin issuers to hold at least 60 percent of their reserves in bank deposits.
Ardoino’s remarks came after the European Central Bank (ECB) and some EU central banks voiced objections to a key provision of the Crypto Asset Market Regulation (MiCA) that requires major stablecoin issuers to hold 60 percent of their reserves in bank deposits.
Tether’s CEO stated that the company decided not to apply for an EU license due to these conditions. The approach that mandates a significant portion of reserves to be held in bank deposits has a direct impact on the reserve management and operating model of stablecoin issuers.
MiCA aims to create a common regulatory framework for crypto asset services and stablecoin issuers across the EU. Under the regulation, stablecoin issuers are required to comply with specific rules regarding their reserve assets.
The objections from the ECB and EU central banks to the reserve requirement have reportedly reignited debates about the implementation of the regulation and the structure of the stablecoin market.
Tether’s decision to abandon its plan to apply for an EU license is a notable development for the company’s operations in the European market. The company’s decision has also brought back into focus the balance that stablecoin issuers strike between regulatory requirements and reserve management.
*This is not investment advice.
