The European Central Bank (ECB) and the central banks of EU member states have suggested that stablecoin issuers should not be required to hold a minimum portion of their reserves in bank deposits. This recommendation comes from a consultation on the EU's MiCA regulation ("Markets in Crypto-Assets"), which is set to take effect in 2025. The European System of Central Banks (ESCB), which includes the ECB and the 27 national central banks of EU countries, made this proposal to address potential risks to financial stability. Stablecoins are a type of cryptocurrency designed to maintain a stable value, usually by being pegged to a traditional currency like the euro or the U.S. dollar. They are used for payments and fast, low-cost transfers, offering an alternative to traditional banking systems. Under current rules, stablecoin issuers must hold either 30% or 60% of their reserves in bank deposits, depending on their size. However, the central banks are proposing changes to the MiCA regulation to eliminate this requirement. Instead of requiring reserves to be held in bank deposits, the central banks recommend specifying that a minimum portion of reserves be held in short-term assets, which mature within one to five business days. This change aims to reduce the risk that stablecoins could destabilize the banking system. If stablecoin reserves are kept in bank deposits, they could shift the way banks are financed, replacing stable deposits from individuals with less stable deposits from stablecoin issuers. This could make banks more vulnerable to sudden changes in the market. Regulators have long been concerned that stablecoins could pose a risk to financial stability. Problems in the cryptocurrency market could spread to the broader financial system, potentially triggering a crisis. By adjusting the MiCA rules, the central banks aim to create a more balanced and resilient framework for the growing stablecoin industry.