Circle urges EU to replace stablecoin bank-deposit minimums

Circle urged the European Commission to revise stablecoin reserve requirements in its response to a consultation on the Markets in Crypto-Assets Regulation (MiCA). The USDC and EURC issuer summarized its response on Thursday. The consultation closed Wednesday and sought feedback on whether MiCA remains fit for purpose as crypto markets develop. The responses will inform the Commission's assessment of MiCA and activities beyond its current scope. According to Circle, MiCA requires e-money token issuers to hold at least 30% of reserves in commercial bank deposits, rising to 60% for significant issuers. Circle said mandatory bank deposits expose issuers to banking-sector credit and counterparty risks. USDC temporarily lost its dollar peg in March 2023 after Circle disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank. The funds were subsequently made available after US authorities protected the bank's depositors. Circle urged the Commission to replace the deposit minimums with a more flexible minimum asset liquidity requirement, a position it said aligned with the European Central Bank. Circle also called for removing a 35% cap on reserve exposure to a single sovereign. Circle called for removing a deposit ceiling for each counterparty equivalent to 1.5% of that bank's total assets. Circle urged the Commission to preserve multi-issuance, in which an EU-authorized entity and a foreign-regulated counterpart co-issue a stablecoin. Circle argued that restricting multi-issuance would push users toward offshore providers outside MiCA's protections. The Hyperliquid Policy Center urged the Commission to regulate crypto perpetual futures under the EU's existing securities and derivatives framework, MiFID II. The group called for requirements tailored to perpetual futures and recognition of public blockchain records for transparency and recordkeeping obligations. The Global Blockchain Business Council recommended clearer token classification, proportionate stablecoin safeguards and less duplication between MiCA and payment-services rules. For cross-border stablecoin issuance, the council called for clear redemption responsibilities, enforceable reserve rebalancing and an accountable EU supervisory framework.