MiCAR, new stablecoin rules under consideration
Bank deposit requirements could give way to liquidity-based criteria
As part of the consultation launched by the European Commission on the review of MiCAR, the European System of Central Banks has proposed removing the requirement for stablecoin issuers to hold at least 30% of their reserves with EU banks, or 60% for tokens classified as significant. The paper instead advocates requirements calibrated to the actual liquidity of reserve assets, with a substantial share capable of being converted into cash within one or five business days. The aim is to reduce the direct link between issuers and the banking system, limiting the risk that concentrated redemption requests trigger rapid outflows from the banks holding those deposits. The effects would be most pronounced for large global operators. Tether, the world’s largest stablecoin issuer, has opted not to seek MiCAR authorisation partly because of this requirement. The company has defended its position by pointing to the risks that bank exposure creates for customers. Although Tether has not cited it as an official reason, the rule would also weigh on its profitability, since its business model relies heavily on income generated by reserves invested in US Treasury securities.
The proposed reserve framework
The prudential rationale behind the proposal lies in the effects that issuer deposits can have on bank funding. Unlike relatively stable retail deposits, these funds are more sensitive to market conditions because they fluctuate with stablecoin issuance and redemptions. During periods of heavy redemption demand, an issuer may need to withdraw large sums at short notice, placing pressure on the deposit-taking bank if those funds account for a significant share of its funding base. The proposed framework builds on thresholds developed by the European Banking Authority. For significant tokens, at least 40% of reserves would need to be available within one business day and 60% within five business days. For other tokens, the corresponding thresholds would be 20% and 30%. Short-dated government securities and overnight secured transactions could meet these requirements while giving issuers access to assets that can be mobilised quickly.
The Tether case and the bank deposit requirement
The deposit requirement forms part of MiCAR’s broader safeguarding regime for issuers of e-money tokens, which must protect the funds they receive and keep them segregated from their own assets. The higher threshold applies when a token is classified as significant, based in part on the number of holders, market capitalisation and transaction volumes. For Tether, compliance would have required shifting a substantial share of its reserves from short-dated US Treasury securities into bank deposits, affecting both its asset allocation and profitability. Paolo Ardoino, Tether’s chief executive, has repeatedly criticised this approach, arguing that EU deposit guarantee protection is capped at €100,000 per depositor and that any amount above this threshold remains exposed to the bank’s credit risk. The Circle case illustrates that risk. When Silicon Valley Bank failed in March 2023, Circle temporarily lost access to $3.3 billion of USDC reserves, causing the stablecoin to briefly lose its peg to the dollar. Tether therefore chose not to seek authorisation under MiCAR.
Liquidity risk across banks and markets
Issuer objections and the central banks’ analysis begin with the same mismatch. Stablecoin holders expect to redeem their tokens at any time, while cash deposited with a bank becomes part of the institution’s broader balance-sheet management and may not be immediately available to the same extent. The disagreement concerns which risk each side seeks to contain. From an issuer’s perspective, bank deposits create exposure to the creditworthiness and liquidity of the institutions holding them. From the perspective of the European System of Central Banks, they expose banks to a more volatile source of funding, one that is sensitive to conditions in crypto-asset markets and potentially vulnerable to sudden withdrawals. Government securities held separately from an intermediary’s assets can reduce counterparty risk, but forced sales during a run on redemptions could transmit stress to the bond market. Replacing the deposit thresholds would therefore require concentration limits, diversification criteria and maturity profiles aligned with redemption timelines. Under this approach, prudential safeguards would rest on the liquidity of the reserves, their distribution across instruments and counterparties, and their ability to withstand a period of market stress.
Global issuance and reserve coverage
Revising the reserve requirements leaves a separate issue unresolved for global issuers: the same token may be issued through a company established in the European Union and one or more entities based in third countries. Because all units are fungible, a holder could ask the European entity to redeem tokens originally issued elsewhere. Reserves held in the Union could therefore end up covering liabilities created in other jurisdictions, potentially leaving insufficient resources for European holders during a crisis. MiCAR governs arrangements among issuers established within the Union but does not cover structures involving non-EU entities. The European System of Central Banks is therefore calling for legislative action and, should such models be permitted, third-country equivalence requirements, cooperation between supervisory authorities and safeguards ensuring that European reserves remain available during periods of stress. Access to the EU market would consequently continue to depend on authorisation within the Union and the adoption of a structure compatible with these rules.
The broader framework remains restrictive
Although the proposal to revise the deposit requirement addresses one of the issuers’ main concerns, the paper as a whole points to tighter rules and supervision across other parts of the market. The European System of Central Banks recommends retaining the ban on stablecoin remuneration and extending it to indirect rewards offered through lending or staking services, fee discounts and loyalty programmes. It also calls for a common EU framework for staking and crypto-asset lending and borrowing, based on the economic substance of each service and the risk assumed by the intermediary towards the customer. Further action would define the criteria under which a decentralised finance service can be considered fully decentralised and therefore fall outside MiCAR. For tokens pegged to foreign currencies, the paper proposes more effective enforcement of the issuance limits that apply when their use as a means of payment exceeds certain thresholds. Finally, it supports transferring responsibility for the authorisation, supervision and oversight of crypto-asset service providers from national authorities to ESMA.
Conclusions
The proposal from the European System of Central Banks opens the way for a recalibration of MiCAR. Removing the 30% and 60% thresholds would give issuers greater flexibility in managing their reserves, alongside liquidity, diversification and concentration requirements designed to contain risks to banks and financial markets. Issuers and central banks agree on the need to reconsider the current requirement, although their priorities differ. Issuers want to reduce their exposure to credit institutions and protect the economic sustainability of their business models, while central banks are focused on the stability of bank funding and the consequences of a run on redemptions. The process will nevertheless take time. The current thresholds will remain in force until the regulation is amended, and the Commission is required to present its report by 30 June 2027. Any legislative change would then need to be approved by the European Parliament and the Council. For global issuers, questions surrounding EU authorisation and the issuance of the same token across multiple jurisdictions will also remain unresolved. Under the framework set out in the paper, stablecoins retain a complementary role, while central bank money remains the anchor of the settlement system. Their place in the European market will depend on the soundness of their reserves and operating structures, as well as their ability to comply with the rules across borders.
