EU Central Banks Push for Liquidity-Based Stablecoin Reserve Rules

The European Central Bank and central banks across the European Union have proposed replacing the bank deposit requirement for stablecoin reserves under the Markets in Crypto-Assets (MiCA) framework with liquidity standards.

Under current rules, stablecoins are required to hold at least 30% of their reserves as bank deposits, while significant stablecoins must keep more than 60%. However, the European System of Central Banks (ESCB) is now calling for an end to these deposit requirements and instead wants liquidity standards based on the share of reserve assets that can be converted into cash within one and five business days.

The ESCB emphasized the need for highly liquid assets such as overnight repurchase agreements (repos) and short-term government bonds, arguing that large-scale stablecoin redemptions could prompt issuers to quickly pull bank deposits, increasing liquidity strains on banks. The European Banking Authority has also presented its own set of standards, which would require significant stablecoins to hold at least 40% of their reserves in assets convertible into cash within one business day and 60% within five business days.