ECB Seeks Relaxation of Stablecoin Reserve Rule Amid Bank Funding Concerns

The European Central Bank (ECB) and 27 national central banks have requested that the European Commission remove a rule from the MiCA regulation. This rule, which is set to be reviewed by September 30, requires significant stablecoin issuers to hold 60% of their reserves in bank deposits. Tether cited this same rule as one of the reasons it refused an EU license for its USDT stablecoin. The ECB and central banks argue that this requirement would expose banks to risk due to potential heavy redemptions of tokens, which could drain funds from lenders overnight. They instead propose a minimum share of reserves held in assets maturing within one to five working days. This change could make it easier for Tether and other stablecoin issuers to obtain EU licenses and increase adoption of cryptocurrencies in the region, but regulators warn that it may also pose risks to bank funding and enforcement.