EU Central Banks Ditch Stablecoin Deposit Rules for Liquidity Standards

The European Central Bank and central banks across the European Union have proposed replacing MiCA's bank deposit requirement for stablecoin reserves with liquidity standards.

The proposal, made by the European System of Central Banks (ESCB), would abolish the current rules requiring stablecoin reserves to be deposited at banks. Instead, it would introduce liquidity standards based on the share 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 to ease banks' liquidity burden during large-scale stablecoin redemptions. The current rules, which require at least 30% of stablecoin reserves to be held in bank deposits, are seen as too restrictive.

The proposal also suggests that significant stablecoins would have to hold at least 40% of reserves in assets that can be converted into cash within one business day and 60% within five business days. For other stablecoins, the thresholds would be 20% and 30%, respectively.