Central banks in Europe want to scrap rules that force stablecoin issuers to keep big deposits in commercial banks. They aim to shift reserves to short-term assets, a move that could change how stablecoins handle risk across the EU.
Central banks across Europe want stablecoin issuers to stop relying so much on commercial bank deposits for their reserves. Right now, EU rules force a big chunk of stablecoin backing to sit in bank accounts. The new proposal would swap these deposits for short-maturity assets. The goal is to lower the risk that stablecoin redemptions could put extra stress on banks during a crisis.
Bank deposit risk under scrutiny
The EU's Markets in Crypto-Assets (MiCA) regulation says stablecoins from electronic-money institutions must keep at least 30% of reserves in commercial bank deposits. For larger, "significant" tokens, that jumps to 60%. This setup means stablecoin issuers depend on banks not just to hold funds, but as a main source of cash for redemptions. If a bank holding these reserves fails or faces a cash crunch, stablecoin holders could suddenly find their tokens less secure or even lose access to their money. The USDC depegging in March 2023, when some reserves were stuck at Silicon Valley Bank, showed how real this risk can be.
The ECB and EU central banks argue that mandatory bank deposit requirements for stablecoin reserves could amplify liquidity risks for both banks and token holders during periods of market stress.
The risk cuts both ways. If lots of stablecoin holders try to redeem at once, issuers may have to pull large sums from their bank accounts. That can drain liquidity from the banks themselves, especially when markets are already tense. Instead of acting as a buffer, stablecoin reserves can end up spreading financial stress.
Proposed shift to short-maturity assets
The European System of Central Banks, which includes the European Central Bank and national central banks, wants to drop MiCA's rule on mandatory bank deposits. They suggest stablecoin issuers should hold minimum amounts of reserves in assets that mature within one or five working days. This would bring the EU closer to the UK's approach. Britain already keeps commercial bank deposits out of the backing for systemic sterling stablecoins, citing worries about financial and contagion risks.
The Bank of England's policy lets up to 70% of reserves be in short-term UK government debt with no more than six months to maturity, and 30% in non-interest-bearing central bank deposits. New systemic issuers can start with up to 95% in government debt. The Bank of England closed its consultation on a draft Code of Practice for systemic stablecoins on the same day European central banks made their recommendation. Final rules are expected by the end of 2026.
Stablecoin reserve structures are under global scrutiny as regulators seek to balance liquidity, safety, and systemic risk. The MiCA review and the UK's evolving regime both reflect a trend toward minimizing direct exposure to commercial banks in favor of highly liquid, short-maturity assets.
Trade-offs and market impact
Right now, EU rules tie stablecoin liquidity to the health of commercial banks. Moving to short-maturity assets would cut direct bank risk, but it brings new problems. Issuers would have to turn securities into cash fast if lots of people want to redeem at once. Even short-term government bonds can lose value or become hard to sell in a crisis. The European Central Bank says a big cash buffer-like deposits-helps issuers meet redemptions without dumping bonds right away. But that only works if the deposits are still available when things go wrong.
Britain's rules try to handle these liquidity risks by requiring extra financial reserves and planning a central bank backstop. In the EU, MiCA's rules stay in place until lawmakers change them. So for now, stablecoin issuers still have to follow the deposit requirements. The comparison shows that no reserve setup is risk-free. The real test is whether reserves can be turned into cash when it matters most.
Regulatory convergence and next steps
The push to change MiCA's reserve rules shows that European regulators see how stablecoin reserves can link crypto and traditional banking in ways that spread risk. The changes won't happen without new laws, and the EU and UK still have different rules and timelines. But the trend is clear. Both are moving to shield stablecoin reserves from bank failures and sudden redemption runs.
For stablecoin users and issuers, the outcome will decide not just where reserves are kept, but how quickly and reliably tokens can be redeemed in a crunch. As rules change, the real impact on liquidity, risk, and user trust will depend on the details-what assets count as reserves, and how easy it is to get cash in a crisis. For more on how European regulation could reshape crypto markets, see our recent coverage.
Under current MiCA rules, stablecoin issuers in the EU must keep at least 30% of reserves in commercial bank deposits, and 60% for significant tokens. The Bank of England's policy, finalized in June, bans commercial bank deposits as backing. Instead, it requires up to 70% in short-term UK government debt and 30% in central bank deposits. The Bank of England's consultation on its Code of Practice for systemic stablecoins closed on September 22, with final rules due by the end of 2026. These timelines and reserve rules will shape how fast stablecoin issuers can meet redemption demands and handle market stress.
Managing stablecoin reserves is a balancing act. Keeping money in commercial banks gives quick cash for redemptions but ties issuers and users to the banks' health. Switching to short-term government bonds may lower direct bank risk, but it can make it harder to get cash fast if markets freeze. How well any reserve system works depends on both the quality of assets and how quickly they can be turned into cash when needed. As stablecoins become more common in payments and finance, the way reserves are managed will decide how reliable and resilient these tokens really are.
