Tether CEO Paolo Ardoino has raised alarms regarding the stability of Europe’s banking sector, suggesting the continent may soon face a series of bank failures. This warning stems from a confluence of risky lending practices and emerging cryptocurrency regulations, which Ardoino believes endanger financial institutions.
In an interview on the Less Noise More Signal podcast, Ardoino criticized the European Union’s regulatory structure for stablecoins. He emphasized that current policies compel companies like Tether to maintain a large portion of their reserves—up to 60%—in uninsured bank deposits, which poses a significant risk.
In his analysis, he pointed out that holding 6 billion euros of a 10 billion euro-backed stablecoin in lesser-protected banks could lead to disastrous consequences. “The bank insurance in Europe is only 100,000 euros,” he stated, noting “if you have 1 billion euros, that’s like spitting on a fire.”
Ardoino elaborated that European banks typically operate on a fractional reserve basis, allowing them to lend out about 90% of their assets for various purposes, including mortgages and business loans. In the hypothetical scenario he outlined, with 6 billion euros held in a bank, 5.4 billion would potentially be lent out.
Tether CEO @paoloardoino to @pahueg: “Many” European banks will “blow up” in the “next few years.”
Link to Tweet
He compared the current situation to the events leading up to the collapse of Silicon Valley Bank in 2023, which was triggered by a surge in redemptions revealing a disconnect between customer deposits and actual liquidity. Ardoino cautioned that the prevalent fractional reserve model among banks in Europe could similarly collapse under stress, projecting that a 20% redemption scenario might leave banks vulnerable for billions.
“As a stablecoin issuer, you go bankrupt — not because of any fault of your own, but due to the bank’s failure. Hence, if the bank goes under, it drags down the stablecoin issuer, prompting governments to label stablecoins as perilous,” he asserted.
He further criticized the EU regulations designed to support banks, claiming they introduce “huge systemic risk.” The largest European financial institutions, like UBS, are unlikely to service stablecoin providers, compelling issuers to depend on smaller banks, amplifying their risk exposure.
Ardoino’s remarks coincide with Tether’s strategy to unveil a U.S.-focused stablecoin later this year, alongside ongoing investments in various ventures, including raising its stake in Latin American producer Adecoagro.
