The European System of Central Banks (ESCB) called on September 22, 2026, to overhaul bank deposit mandates for stablecoin issuers, according to its official consultation response document. Regulators warned that concentrated cash reserves at commercial lenders generate severe liquidity risks.
The central banking network recommended removing rules requiring at least 30% of reserves, or 60% for significant tokens, to be placed as cash deposits in credit institutions across the European Union.
Instead of rigid cash deposit quotas, the ESCB proposed establishing minimum liquidity buckets based on maturity horizons. This structural adjustment would allow stablecoin issuers to manage collateral without straining commercial banking balance sheets.
Central bankers identified alternative liquid instruments to replace bank accounts, specifically pointing to overnight reverse repurchase agreements and high-quality short-term sovereign debt securities to safeguard rapid redemptions without commercial bank intermediation.
This regulatory stance mirrors operational warnings previously highlighted in the regulatory crossroad for Tether, where leadership argued that mandatory bank deposits create systemic vulnerabilities for both traditional lenders and crypto asset issuers.
Shift toward defined liquidity buckets for reserve assets
The ESCB argued that the existing rule creates an unsustainable link between issuers and credit institutions. If stablecoin holders redeem tokens rapidly, the issuer must withdraw large deposit volumes on very short notice.
Such concentrated withdrawals could trigger severe funding shocks for depository institutions, especially if stablecoin reserves account for a substantial percentage of a commercial bank’s overall corporate deposit base.
To address these structural issues, central banks referenced the technical standards on liquidity formulated by the European Banking Authority (EBA) in 2024 for reserve management.
Under the EBA framework, significant token issuers must hold at least 40% in one-day assets and allocate 60% of their total reserves to assets maturing within five working days.
For non-significant stablecoins, the proposed minimum thresholds stand at 20% maturing in one working day and 30% within five days, allowing issuers to diversify assets outside commercial bank deposits.
Interconnected failure risks and settlement alternatives
The central banks stressed that contagion risks operate bidirectionally. Regulators cited the March 2023 collapse of Silicon Valley Bank, where Circle held 3.3 billion dollars in deposits, triggering an immediate depegging event for USDC.
That banking failure illustrated how stress originating inside traditional financial institutions can destabilize stablecoin backing, demonstrating that bank deposits are not inherently risk-free assets for multi-billion-dollar crypto asset reserves.
In late 2024, Tether CEO Paolo Ardoino detailed this risk: if an issuer places 6 billion euros of a 10 billion reserve into banks, fractional-reserve lending leaves only 600 million euros liquid, causing immediate crunches during sudden large-scale token redemptions.
To mitigate reliance on commercial banking rails for wholesale settlement, central banks have released financial tokenization technical reports assessing dedicated platforms capable of settling tokenized transactions in central bank money.
Beyond reserve mechanics, the ESCB flagged persistent cross-border enforcement challenges under MiCA, noting that non-compliant offshore crypto firms continue serving European customers through digital platforms without local authorization.
The European Commission will review the ESCB feedback alongside other stakeholder submissions before deciding whether to introduce formal legislative amendments to the MiCA framework in upcoming review sessions.
This article is for informational purposes and does not constitute financial advice.
