EU Central Banks Oppose Stablecoin Bank Deposit Requirement

EU central banks are pushing back against a requirement for major stablecoin issuers to hold at least 60% of their reserve assets as bank deposits. The European Central Bank (ECB) and national central banks across the EU argue that this mandate poses hidden dangers, including sudden swings in the stablecoin market.

Unlike traditional retail or corporate bank deposits, stablecoin-backed funds can be extremely fluid and prone to rapid withdrawals during market stress, creating liquidity risks for commercial banks. The ECB and 27 national central banks of the EU recommend amending MiCA rules to require a minimum percentage of token reserves to be held in ultra-short-term assets that mature within one to five working days.

This would provide much greater liquidity and structural stability than commercial bank deposits, according to the central banks. They argue that if reserves are held as bank deposits, stablecoins can alter banks' funding structures by replacing relatively stable retail deposits with deposits from stablecoin issuers, which tend to be less stable and more sensitive to market conditions.