ECB Suggests Relaxing Stablecoin Rules, But USDT Still Faces Regulatory Hurdles

The European Central Bank (ECB) and other central banks have expressed concerns about one of the key rules in the Markets in Crypto-Assets (MiCA) framework, which requires stablecoin issuers to hold at least 30% of their reserves in commercial bank deposits. This requirement is even higher for significant stablecoins, reaching up to 60%. The ECB and European System of Central Banks (ESCB) have recommended removing this rule, citing concerns that it could create another source of financial risk.

The proposal echoes one of the concerns raised by Tether in 2024, when its CEO Paolo Ardoino argued that the deposit requirement could leave stablecoin issuers dependent on banks that might not have enough cash when there is a rush for withdrawals. However, despite this new development, USDT still does not have regulatory approval or a clear route to compliant EU platforms.

The removal of the bank-deposit requirement would allow issuers to hold assets that can be converted into cash in one to five working days, rather than being tied up in fixed deposits. This change could potentially alleviate some of the compliance issues faced by stablecoin issuers, but it remains to be seen whether it will actually lead to a wider regulatory victory for Tether.