The European Central Bank and other EU central banks have formally requested amendments to the Markets in Crypto-Assets Regulation (MiCA) regarding stablecoin reserve management. In a response published Tuesday to the European Commission’s review, the European System of Central Banks (ESCB) argued for removing current rules that mandate at least 30% of reserves, or 60% for significant stablecoins, be held as bank deposits. The ESCB contends these existing requirements create a direct link between issuers and credit institutions, potentially exposing banks to liquidity problems if a stablecoin run forces rapid withdrawals.
Instead of fixed deposit ratios, the central banks backed minimum liquidity thresholds for reserve assets maturing within one and five working days. They identified overnight reverse repurchase agreements and short-term sovereign bonds as alternative instruments for achieving this liquidity. This proposal aligns with draft rules from the European Banking Authority published in 2024, which require significant stablecoins to hold at least 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%, respectively. Additionally, the ESCB warned of material challenges in enforcing MiCA, noting that non-compliant crypto companies can still access EU customers despite the bloc’s licensing regime.
The shift from rigid bank-deposit mandates to dynamic liquidity thresholds addresses a critical structural vulnerability in the current regulatory framework. By decoupling stablecoin reserves from specific commercial bank liabilities, regulators aim to prevent contagion effects where a digital asset crisis triggers immediate stress on traditional banking liquidity. This approach recognizes that holding cash in banks is not inherently safer than holding high-quality liquid assets like sovereign bonds, provided the latter can be converted quickly during market turbulence.
However, the effectiveness of this change hinges on enforcement capabilities, which the ESCB explicitly flagged as deficient. Allowing non-compliant entities to retain customer access undermines the credibility of the MiCA licensing regime and creates an uneven playing field. If regulatory arbitrage persists, stricter liquidity rules may simply increase compliance costs for legitimate issuers without reducing systemic risk, as shadow operators continue to serve the market outside the regulated perimeter.
