What could possibly go wrong? With the right regulation, the Bitcoin industry can take off in the EU.

With the MiCA regulation, the EU has also decided on regulatory requirements for stablecoins. For Tether, the publisher of the largest stablecoin USDT, the requirements apparently go too far. The CEO admits that he does not want to fulfill them. Instead, they will prepare for the withdrawal from Europe.

In an interview, Tether CEO Paolo Arduino talked about crypto, stablecoins and Europe. The interview gives a pretty good insight into the consequences of EU regulation and the importance of dollar stablecoins.

Tether releases the largest stablecoin, USDT. Paolo begins by saying that most of Tether’s customers come from Asia and the Middle East, but also from traditional offshore locations such as the British Virgin Islands or the Bahamas. Europe, on the other hand, is more or less not present.

The lack of interest from Europe also explains why Tether has no plans to comply with MiCA requirements for stablecoins. There is too much to achieve and too little to gain. We are neither about to try it nor do we plan to do so in the medium term. Basically, Tether is giving up on Europe, admits Paolo.

Overall, the CEO is pessimistic about the future of crypto in the EU. The MiCA regulation makes it impossible for a business-friendly regulatory framework to emerge in the EU member states. “The message is clear: Europe doesn’t want crypto. This regulation significantly limits access, especially for beginners.”

In a way, Paolo continues, this is understandable. Because Europe must protect the euro. “You have to admit that dollar stablecoins may crush the market for the euro.” Stablecoins like USDT bring the dollar to the whole world in a new, electronic form; A kind of “hyperdollarization” is the surprising consequence of the crypto revolution, and it threatens to displace unprotected, weaker currencies such as the euro.

Europe’s desperate attempt to ‘fight a relentless wave of adoption’

The interviewer then asks the profound question of whether Europe needs to embrace the crypto revolution since it does not have a currency as influential as the dollar. If you don’t want to be overrun by the dollar, you only have the choice between an extremely restrictive policy like China’s, or to rely aggressively on crypto instead of putting obstacles in the way of your own stablecoins.

Paolo somewhat avoids this question. He complains that Europe is desperately trying to “fight a relentless wave of adoption” and is willing to stifle innovation in order to regulate new technologies. In his experience, those who develop the rules too often do not understand how the technology actually works.

For example at MiCA. This regulation imposes strict requirements on how stablecoin issuers must manage their reserves. The issuers of small coins have to keep 30 percent in bank deposits, and those of large ones even 60 percent. According to Paolo, this makes it more difficult to quickly gain access to large sums, as is necessary for massive payout requests. There were months when Tether had to pay out $20 billion. This would not have been possible with such regulation.

The obligation to hold a certain proportion in bank deposits also exposes the issuers of Stabecoin to the risk of losing everything due to bank failures. You protect yourself better with other financial products, such as government bonds.

But the requirements go even further: MiCA requires stablecoin issuers to distribute deposits across six, possibly even twelve, banks. Since few banks in Europe want to work with crypto companies, it is quite difficult to attract even one.

For these reasons, Tether does not currently plan to comply with European regulatory requirements. The continent imposes far too strict requirements despite its low importance for the business of the largest stablecoin.

Circle (USDC) wants to comply with requirements

However, the situation is different for Circle, the publisher of USDC. The second largest stablecoin after Tether has chosen Paris as its headquarters to set up its “EU and MiCA regulatory headquarters” – which strongly suggests that Circle intends to comply with the requirements.

About a year ago, Circle’s EU lobbyist Patrick Hansen wrote on the company’s blog that the MiCA regulation was a real game changer. For Hansen, MiCA is particularly attractive because it unifies regulation in the EU, so that crypto companies no longer have to implement 27 different sets of rules and talk to 27 different regulators, but know which rules apply everywhere. Once a company has a MiCA license, it is valid throughout the EU.

However, Patrick Hansen remains silent about the exact requirements for stablecoins and what these specifically mean for Circle. But the fact that he praises MiCA suggests that Circle intends to meet the requirements.

The two major stablecoin issuers couldn’t be more different when it comes to Europe. There will probably be USDC on EU exchanges and other platforms in the future, but not USDT. Anyone who uses stablecoins in the EU should be prepared for this.

Europe will pay a price for MiCA

The withdrawal of USDT will have a rather unpleasant consequence: While USDC has established itself primarily in the speculative business surrounding decentralized finance (DeFi), the Tether dollars act as a kind of reserve currency in many international gray areas: where in the second and In the third world, inflation destroys savings, where financial sanctions are circumvented, fraudsters prey on their naive victims and where the remittance costs eat too much into people’s earnings – there USDT is now the common currency of choice.

Whether you like it or not: Tether is a globally relevant currency that will most likely play a much larger role in the coming years. However, if the EU imposes requirements to ensure that there is no place for USDT in the EU’s regulated crypto market, it is doing one thing above all else: it is depriving itself of leverage to exert influence over something important.

Source: https://bitcoinblog.de/2024/04/16/tether-ceo-wir-haben-europa-im-grunde-aufgegeben/

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