ECB Hits back at MiCA's stablecoin regulation

The European Central Bank (ECB) and the 27 national central banks that together form the European System of Central Banks (ESCB) have taken direct aim at one of the most contested provisions inside the EU's Markets in Crypto-Assets (MiCA) regulation, formally calling for its removal.

The rule at the centre of the dispute

Under MiCA's current framework, stablecoin issuers classified as "significant" must hold at least 60% of their reserve assets as deposits at commercial banks, with non-significant issuers subject to a 30% floor. The ESCB submitted its position as part of the European Commission's public consultation on MiCA, and its central recommendation is to eliminate the percentage-based bank-deposit mandate entirely and replace it with a rule built around liquidity rather than fixed thresholds.

The concern is straightforward. Requiring major stablecoin issuers to concentrate such a large portion of reserves in commercial bank deposits creates a direct contagion channel. If a stablecoin faces a sudden wave of redemptions during a period of market stress, the resulting outflows could strip liquidity from specific banks rapidly, triggering exactly the kind of instability that financial regulation is designed to prevent. As independent think tank Bruegel has noted, forcing issuers to concentrate reserves in bank deposits creates material concentration risk that cannot be justified on prudential grounds alone.

What the ECB proposes instead

Rather than dictating where reserves must sit, the ESCB recommends shifting the focus to how quickly reserves can be accessed. Under the proposed framework, a defined proportion of reserve assets would need to mature within one to five business days, prioritising liquidity without tying stablecoin issuers to the balance sheets of commercial lenders.

The ESCB also flagged a separate but related concern: European regulators face material challenges in enforcing MiCA in practice, as non-compliant crypto firms continue to access EU customers, raising investor protection risks that sit beyond the reach of the reserve rule debate.

The intervention carries significant weight. It comes from the institution that sets monetary policy for the euro area and reflects a shared position across all EU member state central banks. Whether the European Commission acts on the recommendation remains to be seen, but the pushback adds institutional momentum to calls for MiCA's stablecoin provisions to be revised before they embed further into market practice.

Sources:TechFlow: ECB and EU Central Banks Oppose Stablecoin Bank Deposit Reserve RequirementsCrypto Briefing: European Central Bank seeks to scrap MiCA's stablecoin reserve ruleBruegel: A new strategy to contain stablecoin risks in the European Union