EU Central Banks Seek Stablecoin Reserve Regulation Overhaul

The European Central Bank and EU central banks are pushing for changes to the Markets in Crypto-Assets Regulation (MiCA), specifically the minimum bank deposit requirements for stablecoin reserves. The current rules require at least 30% of reserves, or 60% for significant stablecoins, to be held as bank deposits. However, the European System of Central Banks (ESCB) argues that this creates a link between issuers and credit institutions and could expose banks to liquidity problems if there's a sudden withdrawal of funds.

The ESCB proposes replacing these rules with minimum liquidity thresholds for reserve assets maturing within one and five working days. They also suggest using overnight reverse repurchase agreements (repos) and short-term sovereign bonds as alternative instruments to achieve liquidity.

This move echoes concerns raised by the stablecoin industry, including Tether CEO Paulo Ardoino, who has warned about systemic risks for both banks and stablecoin issuers since at least 2024. In a hypothetical scenario, Ardoino pointed out that if a bank lent out 90% of deposited funds, only 600 million euros would remain available to meet redemptions.