The European Bank (ECB), together with EU national central banks, is pressing Brussels to reconsider a central requirement of the Markets in Crypto-Assets Regulation (MiCA) governing how stablecoin issuers hold their reserves. MiCA, the EU's landmark framework for regulating crypto-asset markets, took full effect in December 2024, with its stablecoin provisions applying since mid-2024. At issue are provisions obliging issuers to keep a portion of their reserve assets in bank deposits.

Under MiCA, stablecoin issuers generally must hold at least 30% of their reserves as bank deposits. For significant stablecoins — the largest tokens, designated as such based on factors such as holder numbers, issuance value, and ties to the wider financial system — the requirement rises to 60%.

The central banks now argue that the rule could create risks for the banking system itself. Their concern centers on the possibility that relatively stable retail deposits would be replaced by funding from stablecoin issuers, which they regard as potentially more volatile.

Why the ECB wants a change

The ECB has proposed shifting the focus toward reserve assets that can mature or become available quickly. Under the suggested approach, a portion of reserves would need to be accessible within one to five working days. According to the central banks, that would give issuers greater flexibility while preserving liquidity.

The ECB has previously warned that stablecoin runs could trigger rapid withdrawals from banks holding issuer reserves.

The debate also highlights a broader tension in European crypto regulation. MiCA was designed to strengthen consumer protection and reserve liquidity, but regulators now face concerns about how those requirements interact with traditional banking.

Tether's position adds pressure

Tether, the issuer of USDT — the world's largest stablecoin by market value — has long relied heavily on short-term government securities and other liquid assets rather than large bank-deposit holdings. European rules have therefore presented a structural challenge for issuers whose reserve strategies differ from MiCA's requirements.

However, available reporting does not establish that Tether directly caused or formally prompted the ECB's latest proposal. The central banks' recommendation instead reflects wider concerns about financial stability and the interaction between stablecoins and commercial banks.

The ECB is also examining broader stablecoin risks, including arrangements in which the same token could be issued through entities inside and outside the EU.

For the cryptocurrency industry, any change would be significant. Because MiCA is an EU regulation, altering the deposit requirement would fall to EU lawmakers in Brussels, making their response to the central banks' recommendation the next step to watch. A revised reserve framework could alter how stablecoin issuers manage billions of dollars in assets while reshaping the balance between crypto markets and European banks.

Source: CryptoMeter io