Circle pushes for overhaul of MiCA stablecoin reserve requirements in EU regulatory review
The stablecoin issuer is calling on the EU to eliminate rigid bank-deposit requirements in favor of adaptable liquidity standards while maintaining the ability to issue stablecoins across borders.
The company behind the USDC and EURC stablecoins, Circle, has called on the European Commission to reconsider reserve requirement rules as part of its submission to a consultation reviewing the Markets in Crypto-Assets Regulation (MiCA).
According to a summary of its submission released Thursday, the digital currency issuer argued that compulsory bank-deposit mandates create exposure to credit and counterparty risks within the banking industry for stablecoin providers.
The company experienced these vulnerabilities directly in March 2023, when its USDC stablecoin briefly deviated from its dollar peg following Circle's revelation that it had $3.3 billion of its reserve assets deposited at Silicon Valley Bank. Those funds were later made accessible after government officials in the United States moved to safeguard the institution's depositors.
The regulatory review consultation, which concluded on Wednesday, gathered input regarding MiCA's effectiveness and its suitability for addressing evolving cryptocurrency markets. The collected responses will guide the Commission's evaluation of the regulation and potential activities that fall outside its existing framework.
Circle aligns with central bank on reserve requirements
Under current MiCA provisions, issuers of e-money tokens must maintain a minimum of 30% of their reserves in deposits at commercial banking institutions, while significant issuers face a higher threshold of 60%, based on Circle's analysis.
Circle expressed support for reevaluating these compulsory deposit thresholds and substituting them with a more adaptable minimum liquidity requirement for assets, a position that aligns with the European Central Bank's perspective.
The firm additionally advocated for eliminating two reserve concentration restrictions that establish a 35% maximum on exposure to any single sovereign entity and set a deposit ceiling with individual counterparties equal to 1.5% of that banking institution's aggregate assets.
Circle also emphasized the importance of maintaining "multi-issuance," a framework that enables a European Union-licensed entity and a foreign-regulated partner to jointly issue a stablecoin. The company contended that restricting this arrangement would drive users toward international providers operating beyond MiCA's regulatory protections.
Industry groups seek changes to onchain market rules
The Hyperliquid Policy Center submitted its own response to the consultation, advocating for the Commission to regulate cryptocurrency perpetual futures under the European Union's current securities and derivatives regulatory structure, known as the second Markets in Financial Instruments Directive, or MiFID II.
The organization requested regulations specifically designed for the market structure of perpetual futures and formal acknowledgment of public blockchain records as an acceptable method for satisfying transparency and recordkeeping requirements.
The Global Blockchain Business Council put forward recommendations for more explicit token classification criteria, proportional safeguards for stablecoins and reduced overlap between MiCA and regulations governing payment services.
Regarding cross-border issuance of stablecoins, GBBC emphasized the need for transparent redemption obligations, legally binding reserve rebalancing requirements and a comprehensive EU supervisory structure with clear accountability.