ECB Proposes to Remove 60% Reserve Rule for Stablecoins
Written with artificial intelligence.
The European Central Bank (ECB) and eurozone central banks are advocating for the removal of the 60% reserve requirement for major stablecoins under MiCA regulations. This shift aims to allow for more flexible asset management while addressing stability concerns associated with current deposit requirements.
ECB's Shift on Stablecoin Regulations
The European Central Bank (ECB) and national central banks in the eurozone are calling for the elimination of the 60% reserve requirement for major stablecoins mandated by the Markets in Crypto-Assets (MiCA) regulation. According to a report by Reuters, the Eurosystem seeks to relax this rule to permit the inclusion of liquid assets that can be accessed within one to five business days.
Concerns Over Current Deposit Requirements
Central bankers argue that the requirement for stablecoins to maintain high levels of deposits in banks leads to unstable funding, which could vanish during mass redemption events. Under MiCA, issuers of electronic money tokens are currently required to back each token with an equivalent reserve, placing at least 30% in bank deposits. Once a stablecoin reaches a major status, defined as having over 10 million holders, €5 billion in circulation, or 2.5 million daily transactions, this requirement increases to 60%.
Proposed Changes to Asset Management
The ECB's proposal suggests replacing the strict 60% minimum with a tiered maturity scale. This would require a portion of reserves to be accessible within one business day, with another portion available within five days. This approach draws from existing regulations governing money market funds, which have long been subjected to daily and weekly liquidity asset quotas.
Broader Implications for Stablecoin Market
The euro-denominated stablecoin market remains less than 1% of the total global market. Current players include Circle's EURC, Société Générale-FORGE's EURCV, and AllUnity's EURAU, while several European banks are establishing their own issuers in the Netherlands. Easing deposit constraints could enhance the profitability of these tokens, shifting reserves towards short-term sovereign debt rather than bank balances.
While the ECB is working on its digital euro, set for testing in 2027 and potential issuance in 2029, the fate of the MiCA revision lies with the European Commission, Parliament, and Council, where the ECB holds only an advisory role. However, Dutch consortium banks are moving forward with plans for their euro stablecoin later this year.