European Central Bank and EU National Banks Push for MiCA Stablecoin Reserve Rule Modifications

European Central Bank and EU National Banks Push for MiCA Stablecoin Reserve Rule Modifications

European monetary authorities are pushing to eliminate MiCA's mandatory bank deposit rules for stablecoin reserves in favor of liquidity-based requirements, citing concerns over potential banking sector stress from mass withdrawals.

European monetary authorities, including the European Central Bank (ECB) and central banks across the EU, are advocating for the elimination of mandatory deposit requirements for stablecoin reserves held at traditional financial institutions, proposing instead a framework based on liquidity standards. Their position stems from concerns that substantial stablecoin deposits pose liquidity threats to the banking sector.

In a formal response published on Tuesday to the European Commission's ongoing evaluation of the Markets in Crypto-Assets Regulation (MiCA), the European System of Central Banks (ESCB) recommended eliminating existing regulations that mandate a minimum of 30% of reserves be maintained as bank deposits, with that figure rising to 60% for stablecoins classified as significant. The feedback was made public as part of the ESCB's contribution to the regulatory review process.

Rather than maintaining the current framework centered on bank-deposit mandates, the ESCB endorsed the implementation of minimum liquidity standards for reserve holdings that mature within both one and five business days. Additionally, the organization identified overnight reverse repurchase agreements (repos) along with short-maturity sovereign debt instruments as viable alternative options that stablecoin issuers could leverage to meet liquidity obligations.

According to the ESCB, the current regulatory framework "creates a direct link between issuers and credit institutions" and has the potential to subject financial institutions to liquidity challenges should a run on a stablecoin compel an issuer to swiftly withdraw their deposited funds.

The European System of Central Banks referenced draft regulatory guidelines released by the European Banking Authority in 2024, which stipulate that significant stablecoins must maintain no less than 40% of their reserves in assets that mature within a single working day, and 60% in assets maturing within five working days. For tokens that do not meet the threshold for significance, these percentages are set at 20% and 30%, respectively.

The ESCB additionally cautioned about "material challenges" in the implementation and enforcement of MiCA regulations, noting that cryptocurrency firms operating without proper compliance continue to maintain the ability to reach customers throughout the EU, notwithstanding the existence of the bloc's licensing framework.