ECB Proposes Changes to Stablecoin Reserve Requirements
- The European System of Central Banks (ESCB) recommends replacing mandatory bank-deposit thresholds for stablecoin reserves with new liquidity requirements.
- Current rules require significant stablecoins to hold at least 60% and non-significant ones 30% of reserves as bank deposits.
- The ESCB suggests minimum liquidity thresholds for reserve assets maturing within one and five working days instead.
- Alternative instruments proposed include overnight reverse repurchase agreements (repos) and short-term sovereign bonds.
- The ESCB warns that existing requirements could expose banks to liquidity risks during a stablecoin run.
These changes aim to mitigate potential liquidity risks associated with large stablecoin deposits, which could affect banks’ stability during market fluctuations. The ESCB’s proposal reflects ongoing concerns about the enforcement of the Markets in Crypto-Assets Regulation (MiCA).
If implemented, these new liquidity thresholds would require significant stablecoins to maintain at least 40% of reserves in highly liquid assets maturing within one working day, shifting from previous deposit mandates.(Source)
