The European System of Central Banks (ESCB) has called for the removal of MiCA rules requiring stablecoin issuers to hold at least 30% of their reserves as bank deposits. For significant stablecoins, the mandatory bank deposit requirement rises to 60% of total reserve assets. The European monetary authority’s stance was published as part of the European Commission’s evaluation process for the MiCA regulatory framework.
The bank deposit mandate was originally designed to ensure protection for crypto asset holders. However, the ESCB warned that this requirement creates direct ties between token issuers and credit institutions. If crypto market turmoil triggers an immediate stablecoin run, banks holding those issuer deposits would be forced to bear the brunt of sudden, large-scale liquidity outflows.
Bond and Repo Alternatives
As a solution to potential liquidity crises, the ESCB proposed overhauling the scheme into minimum liquidity thresholds for reserve assets maturing within one to five business days. The central bank system specifically highlighted overnight reverse repurchase agreements (repos) and short-term government bonds as suitable replacement buffer instruments.
The ESCB’s proposed instrument structure adopts draft rules issued by the European Banking Authority (EBA) in 2024. EBA guidelines mandate that significant stablecoin issuers hold at least 40% of their reserves in assets with a one-working-day maturity, and 60% within a five-working-day maturity. For non-significant tokens, the holding requirements are reduced to 20% and 30%.
Enforcement Challenges on the Ground
Beyond asset reserves, the ESCB flagged material challenges in enforcing MiCA compliance. The institution’s analysis showed that non-compliant crypto firms still have technical loopholes to reach customers across the European Union.
The ESCB’s concerns over bank deposit mandates align with complaints from crypto industry participants. Tether CEO Paolo Ardoino has voiced similar objections since at least 2024, warning that MiCA’s bank deposit rules could introduce systemic risks for both banks and stablecoin issuers.
The decision to revise the crypto regulations now rests with the European Commission, while European banks have an urgent interest in amending the deposit rules before a major run occurs.
Reported by Cointelegraph.
Previously: European Central Bank Releases Pontes System - A Move to Dominate Tokenized Transactions Without Stablecoins
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
