Circle, the firm responsible for the USDC and EURC stablecoins, has turned to the EU to loosen the requirements covering stablecoin reserves. The appeal was made in answer to a review of the Markets in Crypto-Assets Regulation, also called MiCA.
Circle is asking that mandatory bank-deposit minimums be swapped for more flexible liquidity rules. The company also wants the EU to preserve “multi-issuance,” a structure that allows a European Union-authorized entity and a foreign-regulated counterpart to co-issue a stablecoin together.
The shift comes after a difficult period for USDC in 2023. In March of that year, the coin briefly broke its dollar peg following Circle’s disclosure that $3.3 billion of its reserves were kept at Silicon Valley Bank. The funds were eventually made available after US authorities safeguarded the bank’s depositors.
Circle’s Case Against Bank Deposits
Circle is concerned that bank-deposit obligations force stablecoin issuers to take on banking-sector credit and counterparty exposure. The firm would prefer to substitute those mandates with a more adaptable minimum asset liquidity demand.
Circle is proposing the removal of two reserve concentration limits. The first is a 35% cap on exposure to a single sovereign, while the second is a ceiling on deposits with each counterparty equal to 1.5% of that bank’s total assets.
The Multi-Issuance Push
Circle’s strongest argument is preservation. Restricting the multi-issuance structure, Circle warns, would push users toward offshore providers outside MiCA’s protections.
Instead of agreeing with the consultation’s proposal, the Hyperliquid Policy Center suggested a distinct path for the Commission to follow. Its response urged regulators to consider treating crypto perpetual futures as part of the EU’s existing securities and derivatives framework, MiFID II. Hyperliquid called for requirements tailored to perpetual futures’ market structure, while also using public blockchain records as a means of meeting transparency and recordkeeping requirements.
Other Responses to the Consultation
The Global Blockchain Business Council made its own set of recommendations. It called for a clearer way to classify tokens, proportionate protections for stablecoins, and less overlap between MiCA and payment-services rules.
GBBC made a case for clear redemption duties, enforceable reserve adjustments and an EU supervisory system that holds people responsible when it comes to cross-border stablecoin issuance.
The ECB’s Position
The Circle position aligns with the European Central Bank’s view that the current fixed minimum deposit requirements should be reconsidered and substituted with a more adaptable minimum asset liquidity standard.
The current rules under MiCA demand that e-money token issuers keep at least 30% of their reserves in commercial bank accounts. The requirement rises to 60% for issuers deemed significant.
What Happens Next
Wednesday marked the end of the consultation period. The answers collected will shape how the Commission evaluates the regulation and expands its work beyond what it currently oversees.
Our View on the Debate
Circle’s argument is straightforward: bank deposits carry risk, and the current rules force issuers to accept it. The company’s position is that liquidity requirements can deliver the same protection without the exposure.
Responses are still being accepted. Before settling on any changes to MiCA, the Commission intends to consider every single one of them.
For companies issuing assets across national lines, the consequences carry weight. A fresh set of rules governing stablecoins could change how these instruments are put together and controlled across the whole of the EU.
The key figures in this round of consultation:
- USDC and EURC, Circle’s two stablecoins
- $3.3 billion held at Silicon Valley Bank
- 30% minimum reserve in bank deposits
- 60% minimum for significant issuers
- 35% cap on exposure to a single sovereign
- 1.5% ceiling on deposits per counterparty, tied to that bank’s total assets
Where the paper stands
The paper backs Circle’s request to swap mandatory bank-deposit minimums for more flexible liquidity rules, and is against any approach that hands the market to the incumbents through licensing regimes and compliance costs that only giants can afford. The danger is big tech dominance, not the technology itself, and the same logic applies here: rules that only big firms can afford to meet freeze today’s leaders in place and lock out whoever would have challenged them.
Circle’s argument is simple: bank deposits carry risk, and the current rules force issuers to accept it. Liquidity requirements can deliver the same protection without the exposure. The paper agrees, because the alternative — a regime that makes it harder for new entrants to compete — is the real threat.
The reader should watch for whether the EU’s eventual response keeps the door open for challengers, or closes it behind the incumbents.
Source material: “Circle urges EU to revise stablecoin reserve rules in MiCA review,” Cointelegraph.
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