The European Union’s MiCA regulation requires stablecoin issuers to keep at least 30% of their reserves at banks, rising to 60% for significant stablecoins. This affects the revenues of stablecoin issuers because banks don’t pay much compared to the yield on investing in short dated government bonds. From the bank’s perspective, MiCAR looks like a good deal because it’s an alternative source of funding. However, a recent paper by a European Central Bank (ECB) economist explores how stablecoin deposits could be rather unattractive for many banks, and potentially attractive to others.
The author looks at it from the perspective of the Basel Committee rules for banks (not the Basel crypto rules).
As we’ll show, banks taking on stablecoin deposits are likely to have to park 100% of the funds in high quality liquid assets (HQLA). One of the interesting conclusions is that regulators could incentivize banks taking on stablecoin deposits to put the funds at the central bank rather than elsewhere.
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