Tether CEO Paolo Ardoino sounds the alarm on Europe’s financial system and warns that a wave of banking failure could hit the continent in the near future due to the intersection of risky loans and new cryptocurrency rules.
Ardoino, during an interview with the smaller noise more signal podcast, aimed at the European Union’s legislative framework for stableecoins, which he said pushes companies like Tether to keep most of their reserves – up to 60% – in uninsured bank deposits.
In his scenario, it could mean having 6 billion euros of a 10 billion euro-pointed stablecoin in small banks with minimal protection. “Bank insurance in Europe is only 100,000 euros,” he said. “If you have 1 billion euros it’s like spitting on a fire.”
European banks operate like any other bank on a fractional reserve, Ardoino added. “They can lend 90% of it to people who want to buy a house, start a business and all this.” In his hypothetical scenario of 6 billion euros, this would mean that 5.4 billion euros would be lent by the bank.
He compared the setup with the construction of Silicon Valley Bank’s collapse in 2023, when a flood of redemptions exposed the mismatch between deposits and actual liquidity. Ardoino warned that European banks are operating under similar fractional reserve models that could loosen under pressure. An estimated event of 20%, he estimated, could leave banks short billions.
“Like a stableecoin issuer, you go bankrupt – not because of you, but because of the bank. So the bank goes bankrupt and you go bankrupt and the government would say,” you told you, stableecoins are very dangerous, “Ardoino said.
Regulations in Europe, he added, is made to try to help banks in the block and bring them liquidity, but this created “huge systemic risk.” The biggest banks in Europe, like UBS, would “not knock stableecoins”, push stablecoin issuers to use smaller banks and promote the risk.
The comments come as Tether plans to launch a US-based stablecoin product, and as the StableCoin emitter continues to invest in various projects outside the ecosystem after he recently raised his share in Latin American producer Adecoagro.
