ESCB Urges EU to Drop 30% Bank Deposit Rule for Stablecoin Issuers
Key points
- The ESCB has formally called for the removal of MiCA's 30% commercial bank deposit requirement for stablecoin reserve holdings, which rises to 60% for systemic issuers.
- Central banks' primary objection is financial stability: mandatory bank deposits create undesirable linkage between stablecoins and the commercial banking system, not merely a revenue constraint for issuers.
- The ESCB proposes replacing the deposit rule with a liquidity standard requiring a portion of reserves to be accessible within one to five working days, achievable through reverse repo or short-maturity securities.
- On multi-jurisdiction tokens, the ESCB's preferred position is a ban, which would make a EU-issued USDC a legally distinct instrument from a US-issued USDC, though alternatives were also considered.
- Dropping the deposit rule would accelerate capital flows out of the banking system, with the ESCB noting only a partial reflux is likely.
The European System of Central Banks (ESCB) has submitted its response to the European Commission’s consultation on revisions to the Markets in Crypto-Assets (MiCA) regulation, calling for the removal of a rule that requires stablecoin issuers to hold 30% of reserves in commercial bank deposits, a threshold that rises to 60% for systemic issuers. The ESCB’s reasoning is notably structural rather than commercial: central banks are less concerned with issuer profitability than with the systemic risk created by tightening the link between stablecoins and commercial bank balance sheets.
In place of the deposit requirement, the ESCB favours a liquidity standard mandating that a defined proportion of stablecoin reserves be realisable within one to five working days. Acceptable instruments under this framework would include reverse repurchase agreements and short-maturity securities, both of which decouple issuer liquidity from bank credit exposure. The submission also takes a position on multi-jurisdiction stablecoins, preferring a ban that would require tokens issued inside and outside the EU to be legally and technically distinct instruments, so a euro-area USDC would be a separate token from its US-issued counterpart, though the ESCB acknowledged alternative pathways exist.
The bank deposit question carries broader macroeconomic resonance. Earlier analyses of stablecoin growth flagged that reserve inflows tend to shift money from retail to wholesale bank deposits; removing the deposit mandate would accelerate outflows from the banking system altogether, even if some funds partially return via the instruments the ESCB now prefers. Worth noting is that the ESCB’s appetite for short-duration sovereign and quasi-sovereign paper as reserve collateral sits more comfortably alongside political momentum for expanded joint EU borrowing to finance defence, which would increase the supply of eligible instruments.