ESCB Pushes for Looser Stablecoin Reserve Rules Amid Liquidity Concerns

The European System of Central Banks (ESCB) is pushing for changes to the upcoming MiCA framework, which governs how stablecoin issuers hold reserves. In a response to the European Commission's review of the Markets in Crypto-Assets Regulation (MiCA), the ESCB argues that mandatory reserve requirements tied to bank deposits could create liquidity stress for banks during periods of rapid redemption.

The ESCB proposes replacing the fixed bank-deposit thresholds with liquidity rules calibrated to how quickly reserve assets can be used. Specifically, they focus on assets maturing within one and five working days. They also highlight overnight reverse repurchase agreements (repos) and short-term sovereign bonds as potential reserve tools that can help issuers meet near-term liquidity targets.

The ESCB warns that a stablecoin run could force fast withdrawals from banks, potentially exposing credit institutions to liquidity problems. This risk is echoed in concerns raised by stablecoin issuers, including Tether's CEO Paolo Ardoino, who warned that MiCA's bank-deposit reserve requirement could create systemic risks for both banks and issuers.