Europe’s central banks want to scrap stablecoin reserve safeguard

European central banks are urging a revision of the Markets in Crypto‑Assets (MiCA) rule that forces stablecoin issuers to keep a fixed share of their reserves in commercial‑bank deposits. The move would align the EU approach with the United Kingdom’s policy, which excludes such deposits from the backing of systemic sterling stablecoins.

Current EU reserve requirements

Under MiCA, electronic‑money institutions issuing stablecoins must hold at least 30% of their reserves in commercial‑bank deposits, rising to 60% for larger tokens. These deposits are intended to ensure that issuers can meet redemption requests.

Proposed amendment

The European System of Central Banks (ESCB), which includes the European Central Bank and national central banks, has recommended replacing the compulsory bank‑deposit share with a requirement that issuers hold a minimum percentage of assets maturing within one and five working days. The change would shift the focus from where the money is kept to the liquidity profile of the assets.

UK’s contrasting stance

On the same day, the Bank of England’s consultation on its draft systemic stablecoin Code of Practice closed. The UK policy deliberately excludes commercial‑bank backing, citing financial, operational and contagion risks. Instead, the code allows up to 70% of reserves in short‑term UK government debt (maturing within six months) and up to 30% in interest‑free central‑bank deposits. For issuers deemed systemic at launch, the allowance can rise to 95% in government debt.

Why the debate matters

Both regimes recognize that placing stablecoin reserves in banks creates a two‑way risk link. A bank failure can undermine confidence in a stablecoin’s backing, as seen when USDC’s peg slipped in March 2023 after part of its reserves were tied to the collapsed Silicon Valley Bank. Conversely, a mass redemption of a stablecoin could force issuers to withdraw large deposits, potentially destabilising the banks holding those funds.

Next steps

For EU issuers, any amendment to MiCA’s statutory floors would require a legislative change through the EU law‑making process. Until such a change is enacted, the existing deposit requirements remain in force.