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EU Central Banks Clash With Brussels Over Crypto Rule
22 Sep
Summary
- European central banks want a MiCA rule on stablecoin reserves changed.
- The ESCB argues large stablecoin reserve holdings pose risks to lenders.
- Tether previously refused an EU license due to the same reserve rule.
European central banks have formally requested changes to a key rule within the EU's Markets in Crypto-Assets (MiCA) regulation concerning stablecoin reserves. The European System of Central Banks (ESCB), which includes the European Central Bank (ECB) and national central banks of all 27 member states, filed comments during the European Commission's review of MiCA. They specifically object to the requirement that significant stablecoin issuers must hold 60% of their reserves in commercial bank deposits.
The ESCB contends that such funds are not stable deposit money, as heavy redemptions could drain liquidity from banks rapidly. Instead, they propose that a minimum portion of reserves be held in assets with short maturities, such as one to five working days. This move by the central banks contrasts with the position of stablecoin issuers like Tether, which previously refused an EU license over this exact clause, arguing it makes tokens less safe. The central banks appear to seek protection for the banking system from stablecoins, while issuers like Tether seek protection for the tokens themselves.
Regulators also noted that non-compliant crypto firms can still access EU customers, posing enforcement challenges. The ECB has previously voiced concerns that the expansion of euro-denominated stablecoins could negatively impact bank lending. The consultation on proposed MiCA amendments is set to conclude on September 30. Until any changes are enacted into law by EU lawmakers, the existing 30% and 60% deposit floors remain in effect, and Tether continues to operate without an EU authorization.
