The European Central Bank and other EU central banks are calling for changes to the bloc’s stablecoin reserve rules warning that current requirements could expose banks to liquidity risks during large-scale redemptions.
Under the EU’s Markets in Crypto-Assets (MiCA) rules, stablecoin issuers must hold at least 30% of reserves as bank deposits, rising to 60% for significant stablecoins. The European System of Central Banks (ESCB) wants those requirements removed and replaced with minimum liquidity thresholds based on how quickly reserve assets can be converted into cash.
The ESCB has proposed requirements tied to assets maturing within one and five working days while identifying overnight reverse repos and short-term government bonds as potential reserve instruments.
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The central banks said the current rules create a direct link between stablecoin issuers and commercial banks. A sudden wave of redemptions could force issuers to withdraw large deposits rapidly potentially putting pressure on banks that rely on those funds.
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The ESCB also pointed to the March 2023 collapse of Silicon Valley Bank which triggered stress for Circle’s USDC after the company disclosed that $3.3 billion of its reserves were held at the bank.
The proposal comes as European policymakers review MiCA and its implementation highlighting a growing regulatory focus on how stablecoins could transmit liquidity shocks between crypto markets and the banking system.
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