Tether is choosing not to comply with the EU's Markets in Crypto-Assets (MiCA) regulation because the company believes the requirements are too restrictive and could be dangerous for the European banking system. Tether has been vocal about what it sees as serious flaws in the regulation.
MiCA requires stablecoins like Tether's USDT to keep at least 60% of their reserves in European banks. Tether prefers to keep its reserves in U.S. Treasuries, which it considers more liquid and easier to redeem quickly.
Tether's CEO, Paolo Ardoino, has warned that forcing stablecoin issuers to rely heavily on traditional banks could make the whole system more fragile and could cause a stablecoin crisis if banks cannot maintain liquidity during a wave of redemptions.
Tether is concerned that the EU is using MiCA to promote the digital euro and restrict financial freedom. Ardoino has criticized the digital euro, raising concerns that a centrally controlled digital currency could be used to track spending and restrict transactions.
MiCA, with all its licensing hoops and reserve mandates, would require Tether to shift focus and invest heavily in meeting EU-specific standards. That's something the company says it's not willing to do, not at the expense of the markets it sees as most in need of financial tools like USDT.
Ardoino stated that he must protect Tether's 400 million users worldwide, not just Europeans. He believes that the European Central Bank is more interested in pushing the digital euro as a way to control people and how they spend their money.
As a result of Tether's decision not to comply with MiCA, some exchanges have delisted USDT trading pairs for users in the European Economic Area to stay compliant with EU regulations.
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