EU Central Banks Seek Stablecoin Reserve Overhaul Amid Banking Risks
The European Central Bank (ECB) and EU national central banks are pushing to change how stablecoin issuers manage their reserves. They argue that current rules requiring stablecoin issuers to hold a set percentage of reserves as bank deposits could put banks at risk.
The current rule, part of the Markets in Crypto-Assets Regulation (MiCA), requires major stablecoin issuers to hold 60% of their reserves in bank deposits. However, this creates a direct link between stablecoin issuers and banks, which can cause problems if a stablecoin faces a sudden wave of withdrawals.
According to the ECB and EU central banks, if an issuer has to pull large deposits from a bank quickly, that bank could face a liquidity crunch. This is especially true if stablecoin reserves make up a large share of the bank's funding.
The central banks also pointed to what happened in March 2023, when Silicon Valley Bank collapsed. Circle had $3.3 billion of its USDC reserves held at the bank, which triggered a run on the stablecoin.
The ECB and EU central banks want to replace deposit rules with minimum liquidity thresholds. Under this new approach, a portion of reserves would need to mature within one working day, and a larger portion within five working days.