The European Central Bank and the national central banks of EU Member States seek to amend Minimum Deposit Requirement stablecoin in MiCA

The European Central Bank (ECB) and the national central banks of EU countries want to replace the current requirement for stablecoin issuers to deposit part of their reserves in a bank with new liquidity requirements, arguing that large-scale stablecoin deposits could pose liquidity risks to banks.

The European System of Central Banks proposes to abolish the deposit ratio requirement

The European System of Central Banks (ESCB) has called for the abolition of current rules requiring issuers to hold at least 30% of their reserves (60% in case of large stablecoins) as bank deposits. This suggestion is contained in the ESCB's feedback on Tuesday published a report evaluating the EU Commission's MiCA assessment of crypto-asset market regulation.

Shift to short-term liquidity threshold

The ESCB advocates replacing the current bank deposit rule with a minimum threshold for reserve liquidity, which requires that reserves are matured within one to five business days. In addition, the central banking system notes overnight reverse repurchase agreements and short-term sovereign bonds as other tools by which issuers can achieve their liquidity objectives.

The ESCB stated that the existing requirement created a direct link between issuers and credit institutions, forcing them to quickly withdraw deposits in case of liquidity shortages.

Refer to draft standards from banking regulators

The central banks cited a draft rule issued by the European Banking Authority (EBA) in 2024 that large stablecoins must have at least 40% of their reserves allocated to assets maturing within one working day and 60% to those maturing over five working days; for non-large tokens, the corresponding thresholds are 20% and 30%, respectively.

The implementation of the MiCA remains a mystery

The ESCB also warns that the MiCA faces significant challenges in its practical implementation, as non-compliant crypto businesses will still be able to reach EU customers under the EU's licensing regime.

The European Central Bank (ECB) has launched the Pontes project, which will enable settlement of tokenized assets without relying on stablecoins.