European central banks are recommending that the European Union remove a requirement forcing stablecoin issuers to maintain a fixed portion of their reserves as commercial-bank deposits.
Under the EU’s Markets in Crypto-Assets framework, stablecoin issuers generally must hold 30% of their reserve assets as bank deposits. The requirement rises to 60% for stablecoins classified as significant.
European central banks are concerned that the rule intended to provide liquidity protection could create a different financial-stability vulnerability.
Large stablecoin issuers could become major sources of bank funding. During periods of stress, heavy stablecoin redemptions could force issuers to rapidly withdraw those deposits, potentially transferring instability from digital-asset markets into the traditional banking system.
The proposed alternative would place greater emphasis on how quickly reserve assets can be converted into cash rather than requiring a fixed percentage to remain in banks.
Central banks have recommended minimum holdings of assets capable of maturing within short periods, including one and five working days.
The proposal represents an important evolution in Europe’s approach to stablecoin regulation.
Stablecoins are generally designed to maintain a stable value by backing tokens with cash or other reserve assets. As their use grows, however, the composition and location of those reserves increasingly matter to regulators responsible for banking-system stability.
European authorities have also raised concerns about arrangements in which stablecoins issued inside and outside the EU are treated as interchangeable. Regulators argue that these structures can complicate supervision and potentially increase redemption and financial-stability risks.
For banks and digital-asset companies, the debate is shifting from simply requiring sufficient reserves toward determining what those reserves should contain and how quickly they can be liquidated during periods of market stress.
The existing MiCA requirements remain in effect. The central-bank recommendation does not itself repeal or amend the rules.
Markets will now watch whether European policymakers incorporate the proposal into future changes to the EU’s stablecoin regulatory framework.
