Europe’s central banks want the European Union to rethink a rule designed to make stablecoins safer, but that can also link a token run directly to the banking system.

For reserve amounts tied to official currencies, MiCA currently requires issuers of non-significant tokens to keep at least 30% as deposits with EU credit institutions. The floor rises to 60% for significant tokens, according to the European Banking Authority’s technical standards .

Reuters and Cinco Días reported Sept. 22 that the European System of Central Banks wants that fixed minimum removed. Deposits would remain eligible, while reserve safety would turn on how much could become cash within one or five working days.

The position is input to the European Commission’s review of the Markets in Crypto-Assets Regulation. The consultation runs through Sept. 30, and the Commission says the responses may inform a later legislative proposal.

That leaves a policy question open: can Europe loosen the link between stablecoins and bank funding while preserving the liquidity needed for redemptions?

Bank deposits give an issuer cash it can use when token holders redeem. Yet a deposit is also a claim on a bank, and a mandatory allocation makes the token’s reserve quality partly dependent on the condition of the institutions holding that money.

During the March 2023 banking turmoil, Circle held part of USDC’s reserves at Silicon Valley Bank, and uncertainty over access to those funds pressured the token’s peg. USDC’s market capitalization fell 26% over a month, according to an ECB analysis .

An issuer facing heavy withdrawals may pull large bank deposits at once, so stablecoin reserves that had looked like funding to a receiving bank can then behave like flighty wholesale money.