ECB Proposes New Liquidity Rules for Stablecoins

The European Central Bank (ECB) and EU central banks are seeking changes to the Markets in Crypto-Assets Regulation (MiCA), specifically regarding minimum bank deposit thresholds for stablecoin reserves.

The ECB argues that large stablecoin deposits could create liquidity risks for banks, and is proposing to replace existing rules with new liquidity requirements. The current rule requires at least 30% of stablecoin reserves to be held as bank deposits, rising to 60% for significant stablecoins.

The European System of Central Banks (ESCB) has called for removing these bank-deposit thresholds and instead introducing minimum liquidity thresholds for reserve assets maturing within one and five working days. They also suggest alternative instruments such as overnight reverse repurchase agreements (repos) or short-term sovereign bonds to achieve liquidity.

The ESCB warns that the existing requirement creates a direct link between issuers and credit institutions, and could expose banks to liquidity problems if there is a run on stablecoins forcing an issuer to rapidly withdraw deposits. They also point out that enforcing MiCA will be challenging, as non-compliant crypto companies can still access EU customers.