ECB Backs Tether on MiCA Rule but USDT Compliance Issues Remain

The European Central Bank (ECB) has backed part of Tether's concerns regarding the Market in Crypto-Assets (MiCA) framework, specifically a rule requiring stablecoin issuers to keep at least 30% of their reserves in commercial bank deposits.

This requirement is set to increase to 60% for significant stablecoins. However, the ECB and the European System of Central Banks (ESCB), which includes the ECB and the EU's 27 national central banks, have expressed concerns that this rule could create another source of financial risk.

The ESCB has proposed allowing issuers to hold assets that they convert into cash within one to five working days. This proposal echoes Tether's argument made in 2024 by its CEO Paolo Ardoino, who stated that the deposit requirement could leave stablecoin issuers dependent on banks that might not have enough cash when there is a rush for withdrawals.

The new recommendation still needs to pass through the European rulemaking process before it can be amended. Despite this development, Tether's USDT remains without regulatory approval or a clear route to compliant EU platforms, and its removal from several regulated European trading platforms has had significant implications on liquidity across the wider crypto market.