ECB Seeks to Scrap MiCA Rule for Stablecoin Reserve Requirements

The European Central Bank (ECB) and EU central banks are urging Brussels to scrap a rule requiring stablecoin issuers to hold a fixed share of their reserves in bank deposits. The current MiCA requirement demands that stablecoin issuers regulated as electronic money institutions keep at least 30% of their reserves as deposits with credit institutions, while those designated as 'significant' must maintain 60%. However, the European System of Central Banks (ESCB) recommends removing these thresholds.

The ESCB suggests replacing the deposit thresholds with liquidity-based requirements that focus on how quickly reserve assets can be converted into cash. Issuers would need to hold a minimum share of reserves in assets that can be settled or converted to cash within one to five working days, such as overnight repurchase agreements or short-term government bonds.

The ECB and EU central banks are concerned that the current rule could lead to pressure on financial institutions during market shocks. They estimate that a significant e-money token could fund redemptions equal to 60% of its supply through withdrawals from bank deposits alone before needing to sell any government debt.