The European Central Bank (ECB) and the central banks of the EU have proposed changes to the reserve storage requirements for stablecoins. They aim to replace the mandatory bank deposit requirements, which stipulate that 30% of reserves for stablecoins and 60% for significant stablecoins must be held as bank deposits, with new liquidity requirements. The proposal was made in response to the European Central Bank System (ESCB), published on Tuesday, regarding the European Commission's review of the Markets in Crypto-Assets Regulation (MiCA).
Instead of the current rules, the ESCB proposes to establish minimum liquidity thresholds for reserve assets with maturities of one and five business days. Specifically, significant stablecoins must hold 40% of reserves in assets that mature within one business day, and 60% in assets that mature within five business days. For minor tokens, lower requirements are set: 20% and 30%, respectively. The ESCB separately pointed to overnight reverse repo transactions and short-term government bonds as alternative instruments that issuers could use to achieve liquidity. This initiative reflects the ESCB's concerns that large stablecoin reserves could pose liquidity risks to banks in the event of mass withdrawals.
The ESCB emphasizes that the existing requirement creates a direct link between issuers and credit institutions, which may expose banks to liquidity risks in the event of rapid deposit withdrawals due to a 'run' on stablecoins. Additionally, central banks warned of 'material issues' in ensuring compliance with the MiCA regulation, as non-compliant crypto companies may continue to approach clients in the EU despite the existing licensing system.
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