ECB Pushes to Replace MiCA Stablecoin Deposit Rules with Liquidity

The European Central Bank seeks to replace stablecoin bank deposit rules with liquidity thresholds. This move aims to prevent sudden withdrawals from straining commercial lenders.

Current regulations require issuers to hold significant reserves in bank deposits. The ESCB argues this creates a direct link that exposes credit institutions to acute liquidity risks.

Liquidity thresholds replace deposit mandates

The ESCB recommends removing the requirement for thirty percent of reserves in bank deposits. Instead, they support assets maturing within one or five working days.

Significant stablecoins would need forty percent of reserves maturing within one working day. Non-significant tokens must hold twenty percent in these short-term liquid assets.

Enforcement gaps persist in the market

The central banks warn of material challenges in enforcing current MiCA standards. Non-compliant companies can still access EU customers despite the existing licensing regime.

Cointelegraph reports that the ESCB published this response to the European Commission’s review. The proposal highlights ongoing concerns about systemic stability in digital assets.

Alternative instruments offer safer reserves

Overnight reverse repurchase agreements provide a viable alternative for reserve holdings. Short-term sovereign bonds also meet the proposed liquidity requirements effectively.

These instruments reduce reliance on commercial banks for stablecoin backing. This shift could mitigate the risk of rapid deposit withdrawals during market stress.