EU Central Banks Target Stablecoin Deposit Rules
EU central banks propose changing stablecoin reserve rules to prevent bank funding risks
In brief
EU central banks propose changing stablecoin reserve rules to prevent bank funding risks Stablecoin issuers must hold liquid assets within 1-5 days instead of bank deposits to avoid destabilizing banks Originally reported by Pymnts.
New stablecoin rules proposed
EU central banks published a paper Tuesday arguing current stablecoin deposit rules could destabilize banks.
“If reserves are held as bank deposits, stablecoins can alter banks' funding structures by replacing relatively stable retail deposits with deposits from stablecoin issuers, which tend to be less stable and more sensitive to market conditions”
Current rules too risky
The proposal requires stablecoin issuers to hold 30% of reserves as bank deposits, or 60% for major issuers.
New reserve requirement
Central banks recommend stablecoin issuers hold liquid assets maturing within one to five working days.
Bank funding risks
Stablecoins could replace stable retail deposits with less stable deposits from issuers sensitive to market conditions.
Regulatory challenges
EU regulators face material challenges enforcing crypto rules as non-compliant companies still access EU customers.
The big picture
Stablecoin issuers must hold liquid assets within 1-5 days instead of bank deposits to avoid destabilizing banks
