ECB backs Tether’s MiCA concern—but USDT’s EU problem remains

European central banks want one of MiCA’s key stablecoin rules removed, nearly two years after Tether raised concerns about the same requirement.

The new proposal supports part of what Tether argued against in the past in the European framework. But despite this new development, USDT still does not have regulatory approval or a clear route to compliant EU platforms.

ECB questions MiCA’s bank deposit rule

MiCA requires those issuing stablecoins to keep at least 30% of their reserves in commercial bank deposits. For the stablecoins that are considered significant, that requirement goes up to 60%.

The European System of Central Banks [ESCB], which includes the European Central Bank [ECB] and the EU’s 27 national central banks, now wants that rule removed.

In its response to a review of MiCA, the group warned that forcing issuers to hold large bank deposits could create another source of financial risk.

If customers decide to cash their stablecoin holdings, the company will also need to withdraw billions from their banks. As a result of this, Banks might not be able to return the money immediately, especially if they have lent most of it out.

The central banks want rules allowing issuers to hold assets that they convert into cash in one to five working days.

In 2024, the CEO of Tether, Paolo Ardoino, argued that the deposit requirement of MiCA could leave stablecoin issuers dependent on banks that might not have enough cash when there is a rush for withdrawals.

Does the proposal help Tether?

The new recommendation shows that Tether was right on one disputed part of MiCA, but what it does not do is translate to a wider regulatory victory.

The ESCB remains concerned about stablecoins issued across several regions but treated as interchangeable. European authorities feel this will allow redemption from outside the EU, which can drain reserves held in these countries.

Tether is yet to get a MiCA approval, so that part still affects it. As a result of this, USDT has been removed from several regulated European trading platforms.

The change proposed still needs to pass through the European rulemaking process before it can be amended.

The position that Tether holds makes it difficult to ignore in the discussion. CoinGecko data shows that USDT’s market value is around $183 billion, which is about 63% of the roughly $292 billion stablecoin market.

As a result of its size, any rule affecting USDT can influence liquidity across the wider crypto market, even when the token is not authorized for regulated EU distribution.

Final Summary

• European central banks want MiCA’s fixed bank-deposit requirement removed.
• The proposal echoes one Tether concern but does not resolve USDT’s wider compliance problems.