Key facts
- European central banks want to replace MiCA's stablecoin bank-deposit requirements with liquidity thresholds.
- The European System of Central Banks (ESCB) proposed removing rules requiring at least 30% of reserves to be held as bank deposits.
- The ESCB suggested minimum liquidity thresholds for reserve assets maturing within one and five working days.
- The ESCB warned that large stablecoin deposits could expose banks to liquidity problems.
- The ESCB also warned of challenges in enforcing MiCA, citing non-compliant crypto companies accessing EU customers.
European central banks are advocating for a shift away from mandatory bank deposit requirements for stablecoin reserves under the Markets in Crypto-Assets Regulation (MiCA). The European System of Central Banks (ESCB) published a response Tuesday to the European Commission's review of MiCA, proposing to replace existing rules with minimum liquidity thresholds for reserve assets. The ESCB argues that the current framework, which mandates that at least 30% of reserves (or 60% for significant stablecoins) be held as bank deposits, could create liquidity risks for banks if a stablecoin experiences a run and issuers rapidly withdraw funds. Instead, the ESCB favors requirements for assets to mature within one and five working days, citing overnight reverse repurchase agreements and short-term sovereign bonds as potential alternative instruments. Draft rules from the European Banking Authority suggest thresholds of 40% maturing within one working day and 60% within five for significant stablecoins, and 20% and 30% respectively for non-significant ones. The ESCB also expressed concerns about the enforcement of MiCA, noting that non-compliant crypto firms can still access EU customers.