ECB, EU Central Banks Urge Removal of Stablecoin Bank Deposit

Key Takeaways

• ECB and EU central banks oppose minimum bank deposit requirements for stablecoin reserves.
• Reserve withdrawals could spread stablecoin market stress to lenders.
• The European Commission’s MiCA consultation closes September 30.

The European Central Bank (ECB) and EU national central banks called for removing mandatory bank deposit requirements for stablecoin reserves on September 22, Reuters reported.

The proposal came in a consultation response from the European System of Central Banks (ESCB), a body made up of the ECB and the 27 national central banks of EU countries.

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Their response proposed minimum reserve allocations to assets maturing within one and five working days instead. Separately, the ESCB also warned that non-compliant crypto firms still reach EU customers, raising investor-protection concerns.

Why the Deposit Rule Matters

Under the Markets in Crypto-Assets Regulation, or MiCA, electronic money institutions issuing stablecoins must keep at least 30% of reserves in bank deposits. The threshold rises to 60% for significant issuers, according to ECB analysis.

Bank deposits provide cash to meet redemptions without immediately selling other reserve assets. However, the ECB’s April analysis warned that large withdrawals during a stablecoin run could transmit stress to banks.

The International Monetary Fund (IMF) raised similar concerns in June. Its staff warned that reserve requirements could transmit liquidity stress to EU banks during large redemptions as stablecoin activity grows. They said the risk was not imminent.

MiCA Review Remains Open

The European Commission is collecting feedback on whether MiCA remains suitable following its initial implementation and subsequent market developments.

Its consultation closes on September 30.

Responses will inform a review report that could be accompanied by proposed legislation.

Any amendment would require further legislative action, as the consultation itself does not change existing obligations.

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