Hyperliquid Policy Center and Circle seek EU changes to perps and stablecoin rules

The European Commission's MiCA review consultation closed on September 30 after the Commission extended its deadline from August 31. The Hyperliquid Policy Center (HPC) urged the Commission to regulate crypto perpetual futures under MiFID II rather than the Markets in Crypto-Assets Regulation (MiCA). HPC argued that MiFID II's existing derivative categories already cover perpetual futures, so new legislation is unnecessary. HPC CEO Jake Chervinsky wrote that an instrument's economic features, not the ledger recording it, should determine its classification. HPC opposed treating perpetual futures as contracts for difference, which the European Securities and Markets Authority restricted for retail traders in 2018. HPC argued that a perpetual futures trading venue is not itself the counterparty, unlike a contracts-for-difference provider. HPC asked the Commission to require trading venues to publish funding methodologies, maintenance margins and liquidation thresholds in advance. HPC also asked the Commission to confirm that using a public blockchain does not itself change a regulated product's classification. HPC said a regulated firm could build a market on Hyperliquid's HIP-3 infrastructure, set leverage limits, restrict access and offer the market to clients as a regulated product. HIP-3 markets accounted for 75% of Hyperliquid's overall trading volume at one point in late July, according to The Block's data. Their share fell to roughly a quarter in recent weeks. The Hyperliquid Foundation funded HPC in February with 1 million HYPE tokens, then worth about $29 million. HPC made a similar proposal to the SEC and CFTC in August. Circle asked the Commission to loosen MiCA's stablecoin reserve rules and preserve multi-issuance. Circle has issued USDC and EURC in the EU through its French entity since July 2024. Circle said only three of the world's top 25 stablecoins by market capitalization are currently MiCA-regulated: USDC, USDG and EURC. Circle declined to share its full submission. MiCA requires e-money token issuers to hold at least 30% of reserves in commercial bank deposits. The requirement rises to 60% if the European Banking Authority deems a token significant. Circle argued that the deposit floor increases exposure to banking-sector credit and counterparty risk. USDC briefly lost its $1 peg in March 2023 after Circle disclosed that $3.3 billion of its roughly $40 billion in reserves was held at the failed Silicon Valley Bank. The European Central Bank and other central banks in the European System of Central Banks also proposed removing the deposit minimums. They proposed instead that a set share of reserves mature within one and five working days. Circle backed replacing the deposit floor with a less rigid minimum asset liquidity requirement. Circle also sought removal of a rule capping exposure to any single government at 35% of reserves. Circle said that cap makes it impossible for dollar-denominated tokens to hold mostly sovereign debt such as U.S. Treasurys. Circle sought removal of a rule capping an issuer's exposure to any one bank at 1.5% of that bank's total assets. Circle said the bank cap would force large issuers to maintain reserve relationships with dozens of banks. Circle argued that multi-issuance, in which an authorized EU entity and a foreign-regulated affiliate co-issue a stablecoin, is currently the only way tokens such as USDC can operate within MiCA. Circle warned that restricting multi-issuance would move that usage outside EU regulation. The European System of Central Banks said MiCA needs legal clarification on whether third-country multi-issuer arrangements are permissible. Deutsche Börse Group proposed a separate category for settlement e-money tokens in its September 29 response, warning that settlement failures can spread. Chamber of Progress said in its September 30 response that consumers should be allowed to earn rewards on e-money tokens, despite MiCA's restrictions on interest. Chamber of Progress also supported multi-issuance with enforceable EU redemption rights.