Europe's central banks are pushing the EU to drop MiCA's mandatory bank deposit floor for stablecoins. They want liquidity-based reserve tests instead, aiming to cut contagion risk between token issuers and banks. The change could reshape how stablecoin reserves are managed.
Europe's central banks are taking aim at the heart of the EU's stablecoin rules. They want to move away from fixed bank deposit quotas and use liquidity-based reserve tests instead. Right now, the Markets in Crypto-Assets Regulation (MiCA) forces stablecoin issuers to keep a set share of reserves as deposits with EU banks. Central banks say this rule could make financial contagion worse. If there's a run on stablecoins, it could hit banks directly and trigger sudden liquidity shocks in both sectors.
Contagion risk in stablecoin reserves
MiCA's current rules say non-significant stablecoins must keep at least 30% of reserves in EU bank deposits. For significant tokens, the threshold is 60%. These quotas are meant to make sure stablecoins can be redeemed fast. But they also tie stablecoins and banks together. If a bank holding stablecoin reserves gets into trouble, the token's backing is at risk. If there's a rush to redeem tokens, issuers might have to pull big deposits out of banks, draining liquidity when it's needed most. The European System of Central Banks (ESCB) now wants to drop these fixed minimums. Instead, they want issuers to prove that a chunk of reserves can be turned into cash within one or five working days.
The ESCB has proposed replacing MiCA's fixed deposit quotas with liquidity tests, requiring stablecoin issuers to prove that a portion of reserves can be converted to cash within one or five working days.
This change would let stablecoin issuers spread reserves beyond just bank deposits. They could use short-term government debt or reverse repos, as long as the assets meet strict liquidity and quality rules. The ESCB's proposal is now with the European Commission. There's a consultation period open until September 30. The final decision could change how stablecoins are managed and watched across the EU.
How the proposed liquidity test works
The ESCB's plan sets liquidity thresholds based on how fast reserves can be accessed, not where they're kept. For non-significant tokens, at least 20% of reserves must be available within one working day, and 30% within five days. For significant tokens, those numbers go up to 40% and 60%. Eligible assets include cash, overnight reverse repos, and highly liquid government bonds. There are limits on how much can be held with any one bank or issuer, and on overcollateralization. The European Banking Authority's (EBA) liquidity coverage rules would decide which assets count.
By moving away from mandatory bank deposits, the new model could loosen the direct ties between stablecoin issuers and commercial banks. Issuers would have more freedom to choose where to put reserves, and could earn higher yields from government debt or repo markets. But this also means that if government bond or funding markets come under stress, risk could flow back to stablecoins-especially if reserves are concentrated or if market liquidity dries up during redemptions.
The MiCA regulation, effective since 2024, introduced strict reserve, governance, and redemption requirements for stablecoin issuers in the EU. The current debate centers on whether liquidity-based reserve tests can maintain user protection and systemic stability without exposing banks to sudden outflows or stablecoins to new market risks.
Winners, losers, and market impact
If the deposit floor is scrapped, commercial banks lose a guaranteed share of stablecoin reserves. Issuers get more say over how to allocate reserves, within a regulated list of assets. Tether Holdings, which has criticized MiCA's deposit rules before, says forcing reserves into banks increases systemic risk. CEO Paolo Ardoino has warned about the dangers of mandatory bank exposure, especially after the March 2023 banking turmoil. That episode saw Circle's USDC reserves at Silicon Valley Bank come under pressure, and USDC's market cap dropped 26% in a month, according to an ECB analysis.
Euro stablecoins are still a small part of the global market. In January 2026, their total capitalization was about €450 million, compared to roughly $300 billion for dollar-backed tokens. But as more people use them, how reserves are structured and concentrated could become a big weak spot. The proposed liquidity test would still set strict rules on asset quality, issuer concentration, and overcollateralization. But it would shift some risk away from banks and toward government debt and funding markets. The European Commission's decision will decide if stablecoin redemptions can be handled without sparking wider financial trouble.
Regulatory context and industry response
The fight over stablecoin reserve rules comes as the EU keeps tweaking its digital asset oversight. MiCA covers everything from authorization and governance to capital, audits, reserve segregation, redemption, and prudential supervision for stablecoin issuers. Dropping the deposit floor would not mean automatic EU approval for tokens like Tether's USDT. It also wouldn't solve all industry complaints about MiCA's other limits on non-euro stablecoins. For example, Europe's changing crypto rules have also hit staking, as shown in EgonCoin's reported earlier analysis of proposed EU staking rules.
As the consultation period ends, the main question is whether a liquidity-based approach can keep redemptions safe without opening the door to new contagion risks. The ESCB's plan would weaken the direct link between stablecoins and bank funding. But how well it works will depend on the credit quality, liquidity, and concentration of the assets backing each token. The change could also shift more reserves into government debt and repo markets, and away from bank deposits.
Euro stablecoins made up about €450 million in market cap as of January 2026, according to ECB data. Dollar-backed stablecoins reached around $300 billion. During the March 2023 banking crisis, Circle's USDC lost its peg after questions about reserves at Silicon Valley Bank, leading to a 26% drop in market cap in one month. These numbers show how risk can move between stablecoin issuers and banks under current reserve rules.
Designing stablecoin reserves is a balancing act between liquidity, safety, and systemic risk. Fixed deposit quotas keep reserves inside the banking system, but they also tie stablecoins to bank failures and funding shocks. Liquidity-based tests give more flexibility and may cut bank contagion, but they bring new risks tied to government debt and repo markets. As stablecoins become more common in payments and trading, how their reserves are built will matter more for financial stability and user trust.
