- JPMorgan has predicted difficulties ahead for Tether over the new MiCA regulations
- The bank’s highlighted that MiCA rules require 60% of stablecoin reserves to be held with European banks, which Tether has not followed
- Tether has responded to JPMorgan analysts, accusing them of a “fundamental misunderstanding” of the crypto industry
Tether has hit back at JPMorgan analysts who predicted trouble for the company over the new Markets in Crypto Assets (MiCA) legislation. The bank noted in a research paper on Wednesday that the new rules mean that 60% of stablecoin reserves should be held with European banks, which Tether does not do. The USDT issuer responded caustically that JPMorgan analysts had a “fundamental misunderstanding” about how the crypto industry works and said that it has been “very public about our processes and risk management procedures.”
Tether May Need to Enact “Significant Changes”
JPMorgan cautioned that Tether might face significant challenges in meeting the stringent requirements set by MiCA regulations, with its analysts, led by Nikolaos Panigirtzoglou, pointing out that “Given Tether’s composition of reserves, complying with MiCA’s stringent requirements could necessitate significant changes to its reserve management strategy.”
The bank added that Tether has previously been scrutinized by regulators for its lack of transparency regarding reserve composition, opining that the new regulations are expected to “intensify pressure on Tether to provide more detailed disclosure and audits.” The report also warned that failing to comply could jeopardize Tether’s leading position in the stablecoin market.
JPMorgan Has a “Fundamental Misunderstanding” About Crypto
Tether hit back in a statement to Coindesk, claiming that the effects of the regulations, which it said will impact every stablecoin issuer, will “unfold gradually”. It did, however, note that certain aspects of the regulation present challenges that could “complicate the role of stablecoin issuers and increase the operational risks for EU-licensed stablecoins.”
Nevertheless, the company welcomed the new rules, stating, “Tether firmly believes that stablecoin regulations must ensure safety improvements rather than posing systemic risk.”
The tether issuer also had some choice words for the JPMorgan analysts:
JP Morgan analysts seem to still have a fundamental misunderstanding about how our industry works. Tether has been very public about our processes and risk management procedures, proving ourselves to be safer, more transparent, and more secure than recent history has shown traditional financial institutions themselves to be.
Tether added, “While we are sure JP Morgan is enviously looking at Tether’s profit margins and frantically attempting to catch up in the crypto space, Tether remains committed to serving its 350 million customers worldwide and shaping the future of money.”
