ECB Calls for Scrapping Stablecoin Bank-Deposit Rule, Citing Systemic Risks

The European Central Bank and the 27 national central banks of the European Union have formally asked the European Commission to delete a key stablecoin reserve rule under the Markets in Crypto-Assets Regulation (MiCA), warning that the requirement to park large deposits with commercial banks threatens financial stability.

In a response published Tuesday to the Commission’s MiCA review, the European System of Central Banks (ESCB) recommended removing the existing mandate that stablecoin issuers hold at least 30% of reserves as bank deposits — rising to 60% for tokens classified as significant. Instead, the central banks backed minimum liquidity thresholds: requiring reserve assets to mature within one to five working days.

The ESCB argued the current rule “creates a direct link between issuers and credit institutions” that could expose banks to liquidity problems if a stablecoin run forced rapid withdrawals. It pointed to overnight reverse repurchase agreements and short-term sovereign bonds as suitable alternative instruments.

The proposal draws on draft rules published by the European Banking Authority in 2024, which required significant stablecoins to hold at least 40% of reserves in assets maturing within one working day and 60% within five working days. For non-significant tokens, the thresholds were 20% and 30% respectively. The ESCB did not put specific percentages on its own proposal, citing the EBA figures as a reference.

The recommendation aligns the ESCB with an industry criticism voiced by Tether CEO Paolo Ardoino since at least 2024. In an October 2024 interview, Ardoino warned that a stablecoin holding €10 billion in reserves, with €6 billion in bank deposits, might find only €600 million available if the bank lent out 90% — creating a potential liquidity crunch. Following Tuesday’s announcement, Ardoino posted on X that “Europe’s central banks want Brussels to delete the very clause over which Tether refused an EU licence.”

The central banks’ analysis also cited the March 2023 collapse of Silicon Valley Bank, which triggered a run on Circle’s USDC stablecoin after Circle disclosed $3.3 billion of its reserves were held at the bank. The ESCB noted risks flow both ways: a stablecoin run could force rapid deposit withdrawals that strain lenders, while a bank failure could destabilize a stablecoin issuer.

If the Commission adopts the recommendation, the practical difference between the EU rulebook and that of the United States — where the GENIUS Act regulates stablecoin reserves without rigid deposit-percentage requirements — would narrow to maturity-based liquidity floors rather than where the money must sit. The U.S. CLARITY Act, which would have further addressed stablecoin rewards, fell ten votes short in the Senate on 15 September.

**Broader crackdown on stablecoin workarounds**

Beyond reserves, the ESCB urged the Commission to keep its existing prohibition on stablecoin interest payments and to extend the ban to indirect rewards, including certain loyalty-programme benefits and income from staking, lending and borrowing services that “thereby replicating the economic effect of interest payments through ancillary or unregulated services.” The central banks called this “a clear legislative priority.”

On staking — where users lock up crypto for rewards — the response was blunt: “Staking, lending and borrowing of crypto-assets should be regulated at Union level.” Where a firm takes customers’ crypto and promises to return it with a premium, the ESCB argued the arrangement can be “comparable to the taking of repayable funds” in the banking sense.

The ESCB also warned that MiCA’s exemption for fully decentralised finance services lacks a definition, and cited studies showing full decentralisation is rarely achieved, leaving regulatory gaps.

**Licensing, enforcement and foreign-currency tokens**

The central banks backed a Commission proposal to move licensing and supervision of crypto firms from national regulators to the European Securities and Markets Authority (ESMA). The Wall Street Journal reported last week, cited by Euronews, that ECB President Christine Lagarde urged Greek Prime Minister Kyriakos Mitsotakis not to approve Binance’s Greek licence application because of past compliance problems and concerns that its scale could deepen the use of US dollar stablecoins in Europe. A senior Greek regulator told the exchange Lagarde wanted the decision delayed until ESMA took over, according to the newspaper. Binance withdrew the application on 24 June. Neither the ECB nor the Greek regulator has confirmed the account.

The central banks also flagged “material challenges” enforcing MiCA, noting non-compliant crypto companies outside EU borders can still reach EU customers, creating investor protection concerns.

On stablecoins pegged to foreign currencies, the ESCB said authorities should have the power to impose “a prohibition to issue new tokens, as well as an obligation to redeem existing tokens” if a token is judged to pose a threat to financial stability. It warned that MiCA provides no legal basis for issuing the same stablecoin inside and outside the EU, raising risks that during a bank run European reserves could back redemptions abroad while EU authorities cannot determine how many tokens are held within the bloc.

The ESCB’s recommendations are not binding. The Commission’s consultation closes on 30 September. EU diplomats have told Euronews they expect a revision in 2027, which would require approval from the European Parliament and member states.