ECB, EU Central Banks Propose Replacing MiCA Stablecoin Reserve Deposit Rules With Liquidity Standards

The European Central Bank and central banks across the European Union have proposed replacing MiCA rules requiring stablecoin reserves to be kept in bank deposits with liquidity-based standards.

Cointelegraph reported on September 22 that the European System of Central Banks, or ESCB, made the proposal in its response to the European Commission's review of the Markets in Crypto-Assets, or MiCA, framework. The ESCB called for abolishing the current rules requiring stablecoin reserves to be deposited at banks.

MiCA currently requires at least 30% of stablecoin reserves to be held as bank deposits. For significant stablecoins, the minimum is more than 60%.

Instead, the ESCB argued for liquidity standards that would set minimum shares of reserve assets that can be converted into cash within one business day and five business days. It also cited overnight repurchase agreements, or repos, and short-term government bonds as instruments for securing liquidity.

The ESCB said large-scale stablecoin redemptions could prompt issuers to pull bank deposits quickly, increasing liquidity strains on banks.

Under standards presented by the European Banking Authority, or EBA, significant stablecoins would have to hold at least 40% of reserves in assets that can be converted into cash within one business day and 60% within five business days. For other stablecoins, the thresholds would be 20% and 30%, respectively.