The European System of Central Banks (ESCB) on Tuesday proposed replacing MiCA's requirement to hold at least 30% of stablecoin reserves in bank deposits (60% for significant tokens) with minimum liquidity thresholds, warning that sudden withdrawals could put pressure on banks.

Thresholds: 40%/60% for one and five business days

In its response to the MiCA review, the ESCB supported minimum shares of reserve assets maturing within one and five business days. For significant stablecoins, the proposed levels are at least 40% and 60%, respectively; for others, 20% and 30%. Overnight reverse repos and short-term government bonds were specifically mentioned as liquidity tools.

Risks to banks from direct links with issuers

The ESCB noted that the bank deposit requirement "creates a direct link between issuers and credit institutions" and that, in the event of a stablecoin run, issuers could be forced to withdraw deposits rapidly, potentially causing liquidity issues for banks.

Warning on MiCA enforcement challenges

The central banks also pointed to "significant challenges" in enforcing MiCA: even with the current licensing regime, non-compliant crypto firms can still access customers in the EU.