Tether opts out of EU stablecoin regulation’s license over 60% bank rule

Tether has walked away from applying for a license under Europe’s flagship stablecoin framework, and the reason comes down to a single number buried in the fine print of EU stablecoin regulation. Tether CEO Paolo Ardoino said the company refused to seek a Markets in Crypto-Assets (MiCA) license because of a rule forcing major stablecoin issuers to park at least 60% of their reserves in commercial bank deposits. The timing is notable: Ardoino’s comments landed just as the European Central Bank and other EU central banks pushed to scrap that very requirement.

Key takeaways

• According to Tether CEO Paolo Ardoino, the company declined to pursue an EU MiCA license, citing a requirement that major stablecoin issuers keep at least 60% of their reserves as commercial bank deposits.
• The European Central Bank and other EU central banks, through the European System of Central Banks (ESCB), proposed removing that bank-deposit threshold in a response to the European Commission’s review of MiCA.
• The ESCB warns that volatile stablecoin deposits could expose banks to sudden withdrawals, and it recommends liquidity requirements tied to assets maturing within one to five working days instead.
• The change has not been adopted yet, leaving Tether and other issuers to navigate the current rule for now.

Tether Declines EU MiCA License Over Reserve Rule

Tether‘s decision not to apply for MiCA authorization traces directly back to how European rules define reserve safety for large stablecoin issuers. Under the current framework, issuers of what regulators classify as “significant” stablecoins must hold at least 60% of their reserve assets as deposits in commercial banks. Smaller, non-significant stablecoins face a lower 30% threshold, but Tether’s scale puts it squarely in the higher bracket.

CEO Paolo Ardoino’s Statement

Ardoino framed the 60% bank-deposit rule as the core obstacle standing between Tether and formal MiCA compliance. Rather than lock the majority of its reserves inside commercial banks, the company chose to stay outside the licensing regime altogether. His remarks came the same week the ECB and fellow EU central banks pressed the European Commission to rethink the very rule Tether objected to.

This is not the first time industry voices have flagged the requirement. The concerns raised in the ESCB’s new proposal echo warnings the stablecoin industry, including Ardoino, had already been making about how the rule interacts with bank balance sheets.

ECB and EU Central Banks Propose Regulatory Changes

The European Central Bank and other EU central banks want the bank-deposit mandate gone entirely, replacing it with a liquidity-based test instead of a fixed reserve-composition rule. The proposal arrived through the European System of Central Banks, which submitted its response on Tuesday to the European Commission’s ongoing review of the Markets in Crypto-Assets Regulation.

Specifically, the ESCB called for scrapping the rules that require at least 30% of reserves for standard stablecoins, or 60% for those designated as significant, to sit in commercial bank deposits. That second threshold is the one Ardoino pointed to when explaining Tether’s refusal to pursue a license.

Concerns Over Stablecoin Deposit Volatility

Central banks argue that stablecoin deposits behave differently from ordinary customer savings, and that difference is the crux of their case for reform. Large pools of stablecoin-linked money can move in and out of a bank almost overnight if market sentiment shifts, and the ESCB warns that this volatility could expose lenders to sudden, concentrated withdrawal pressure. In other words, the very rule meant to make stablecoin reserves safer could, under stress, make certain banks more fragile rather than less.

Recommended Alternative Liquidity Requirements

Instead of mandating a fixed share of reserves as bank deposits, the ESCB backed minimum liquidity thresholds tied to assets maturing within one to five working days. The central banks also pointed to overnight reverse repurchase agreements and short-term sovereign bonds as alternative instruments issuers could use to meet that liquidity bar. The logic is straightforward: rather than dictating where the money sits, regulators would focus on how quickly it can be accessed if redemptions spike.

Status and Implications of the Proposed Changes

None of this is settled yet. The proposed change to the bank-deposit rule has not been adopted, which means the 60% threshold Tether objected to remains the law of the land for now under current EU stablecoin regulation.

That gap between proposal and adoption matters for how the market reads this moment. If EU regulators eventually swap the deposit mandate for a liquidity-based standard, it could remove the specific barrier Tether cited and reopen the door to a Tether MiCA license application down the line. But until the European Commission acts on the ESCB’s response, issuers face the same choice Tether already made: comply with the existing stablecoin reserve rule or operate outside the licensed framework in the bloc.

The episode also puts a spotlight on a tension regulators themselves are now acknowledging. A rule designed to anchor stablecoin reserves in traditional banking infrastructure can, at scale, create the kind of concentrated liquidity exposure that banking supervisors normally try to avoid. That is effectively the argument behind the push for EU central bank liquidity standards over fixed deposit ratios, and it is likely to keep shaping how Brussels finalizes its MiCA review.

FAQ

Why did Tether refuse to apply for an EU MiCA license?

Tether refused because the EU rule requires stablecoin issuers to hold at least 60% of their reserves in commercial bank deposits.

What is the EU’s current reserve requirement for significant stablecoins under MiCA?

The EU rule requires significant stablecoin issuers to hold at least 60% of their reserves in commercial bank deposits.

What changes have the ECB and EU central banks proposed regarding stablecoin reserve requirements?

They proposed removing the 60% bank deposit reserve requirement and replacing it with liquidity requirements based on assets that mature within one to five working days.

Has the proposed regulatory change been adopted?

No, the proposed change to the regulation has not yet been adopted.

Article produced with the assistance of artificial intelligence and reviewed by the editorial team.