ECB proposes liquidity thresholds to replace MiCA stablecoin bank-deposit rule
In brief
- ESCB proposes scrapping MiCA's 60% commercial bank reserve requirement for large stablecoins.
- Liquidity risks cited: sudden mass withdrawals could destabilize lenders holding stablecoin deposits.
- Alternative: minimum thresholds for short-term liquid assets maturing within one to five working days.
The deposit problem
MiCA currently requires significant stablecoins to hold at least 60% of reserves in commercial bank deposits. The ESCB said the existing requirement "creates a direct link between issuers and credit institutions" and could expose banks to liquidity problems if a stablecoin run forces rapid withdrawal of deposits.
The concern isn't theoretical. The March 2023 collapse of Silicon Valley Bank triggered a run on Circle's USDC stablecoin after Circle disclosed that $3.3 billion of its reserves were held at the bank. Tether CEO Paolo Ardoino has warned since at least 2024 that MiCA's bank-deposit requirements could create systemic risks for both banks and stablecoin issuers.
In an October 2024 interview, Ardoino illustrated the risk with a hypothetical stablecoin holding 10 billion euros in reserves, 6 billion euros of which would have to be kept in bank deposits. If a bank lent out 90% of those funds, only 600 million euros would remain available, potentially creating a liquidity crunch if the issuer suddenly needed billions to meet redemptions.
The ESCB's alternative
Instead of the existing bank-deposit rules, the ESCB backed minimum liquidity thresholds for reserve assets maturing within one and five working days as an alternative. The European Banking Authority's 2024 draft rules set those thresholds at 40% and 60% for significant stablecoins, and 20% and 30% for non-significant tokens.
The ESCB pointed to overnight reverse repurchase agreements and short-term sovereign bonds as alternative instruments issuers could use to achieve liquidity without concentrating risk in a single lender.
The central banks also warned of "material challenges" in enforcing MiCA, noting that non-compliant crypto companies can still access EU customers. That enforcement gap adds urgency to the reserve-rule debate—if issuers can sidestep compliance altogether, tighter liquidity standards matter less.
