ECB and EU central banks push to replace MiCA stablecoin bank deposit rules with liquidity thresholds
What happened
The European Central Bank (ECB) and other EU central banks want to replace the bank deposit requirements in MiCA, the EU's crypto regulation, with new liquidity thresholds. They argue that forcing stablecoin issuers to keep large amounts of money in banks could create serious risks if many users try to withdraw at once.
Key numbers
- MiCA currently requires at least 30% of stablecoin reserves to be held as bank deposits, or 60% for significant stablecoins.
- The European Banking Authority's draft rules require significant stablecoins to hold 40% of reserves in assets maturing within one working day and 60% within five working days. For non-significant tokens, the thresholds are 20% and 30%.
What the ESCB proposed
The European System of Central Banks (ESCB) published its response on Tuesday to the European Commission's review of the Markets in Crypto-Assets Regulation (MiCA). Instead of requiring stablecoin issuers to hold reserves as bank deposits, the ESCB backed minimum liquidity thresholds for reserve assets maturing within one and five working days. The ESCB suggested overnight reverse repurchase agreements and short-term sovereign bonds as alternative instruments issuers could use to meet these liquidity requirements.
The ESCB said the current rules "create a direct link between issuers and credit institutions" and could expose banks to liquidity problems if a stablecoin run forces an issuer to rapidly withdraw deposits.
Tether raised similar concerns in 2024
Tether CEO Paolo Ardoino had already warned about these risks since at least 2024. In an interview with Cointelegraph in October 2024, Ardoino described a hypothetical scenario: if a stablecoin held 10 billion euros in reserves and 6 billion euros had to be kept in bank deposits, and the bank lent out 90% of those funds, only 600 million euros would remain available. This could create a liquidity crunch if the issuer suddenly needed billions to meet redemptions.
After the ESCB announcement on Tuesday, Ardoino posted on X: "Europe's central banks want Brussels to delete a MiCA rule on stablecoin reserves. It forces large issuers to keep 60% of that money in commercial banks. Tether refused an EU license over the same clause."
The Silicon Valley Bank example
The ESCB also pointed to the March 2023 collapse of Silicon Valley Bank as evidence of the risk going both directions. When Circle disclosed that $3.3 billion of its USDC stablecoin reserves were held at SVB, it triggered a run on USDC.
Enforcement challenges
Beyond stablecoin reserves, the ESCB warned of "material challenges" in enforcing MiCA, saying non-compliant crypto companies can still access EU customers.
What is confirmed
- The ESCB formally called for removing MiCA's bank deposit requirements in its response to the European Commission's MiCA review.
- The ESCB proposed replacing bank deposit rules with liquidity thresholds for assets maturing within one and five working days.
- Tether CEO Paolo Ardoino had raised similar bank-risk concerns since at least 2024.
- The March 2023 SVB collapse and its effect on USDC is cited as a real-world example of the risk.
What is still unclear
The article does not specify when or whether the European Commission will act on the ESCB's proposal. It is also unclear how MiCA's existing rules would be modified or replaced.
Why this matters
MiCA is the EU's main regulatory framework for crypto assets. Changes to its reserve requirements could affect how stablecoin issuers operate in Europe and how much risk banks take on from holding stablecoin reserves.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.