The European Central Bank (ECB) and 27 national central banks across the European Union have formally urged Brussels to scrap the MiCA regulation that mandates stablecoin issuers to hold a large percentage of their reserves in commercial bank deposits. This sudden pivot aims to prevent systemic contagion, as central bankers now fear that a mass redemption of a major stablecoin could trigger a liquidity crisis for the banks holding those reserves. By removing this requirement, the ECB is effectively siding with the position Tether has maintained throughout 2025 and early 2026.
Tether, the issuer of USDT, had previously rejected these MiCA requirements, arguing that placing billions of dollars into the fractional-reserve banking system was inherently riskier than holding highly liquid US Treasury bills. The standoff had threatened Tether’s ability to operate legally within the Eurozone. However, the ECB’s new recommendation suggests a realization that forcing crypto-asset service providers to rely on commercial banks creates a dangerous bridge for financial instability to cross from the digital asset market into the broader economy.
For the European crypto market, this regulatory U-turn is a significant victory for stablecoin providers who have advocated for more flexible reserve management. If Brussels follows the ECB’s advice, issuers like Tether and Circle will likely be permitted to keep the majority of their backing in government-backed securities rather than cash deposits. This would reduce the risk of 'bank runs' on traditional lenders caused by crypto market volatility, a scenario that became a primary concern for the 27 EU central banks following recent stress tests.
US-based investors should watch for the formal amendment of the MiCA text in the coming months, as this will determine the legal status of USDT and other major stablecoins in Europe. If the rule is officially scrapped, it will likely solidify Tether’s dominance in the region and provide a clearer path for other USD-pegged coins to expand their European footprint without the burden of banking-sector dependency. The shift marks a transition toward a regulatory model that prioritizes the segregation of crypto reserves from the traditional lending environment.