Circle urges EU to revise stablecoin reserve rules in MiCA review
Reported by Cointelegraph · AI-assisted summary by ChikoCorp AI News Desk
AI-generated summary based on the linked source; not independently verified. This is not investment advice. Verify market-moving details at the original publisher before acting. See our editorial policy, AI content policy, and financial disclaimer.
Summary
Stablecoin issuer Circle has urged the European Commission to revise reserve requirements in the ongoing review of the Markets in Crypto-Assets Regulation (MiCA). Circle criticized mandatory bank-deposit rules, saying they expose stablecoin issuers to banking-sector credit and counterparty risks, an issue it experienced during March 2023 when USDC lost its dollar peg due to reserves held in Silicon Valley Bank. The consultation aims to evaluate MiCA's effectiveness and potential regulatory improvements.
Why it matters
Circle argues that current MiCA reserve rules could undermine stablecoin stability by increasing exposure to banking risks. The company contends that rigid deposit minimums and concentration limits could push users to offshore stablecoin providers outside MiCA’s regulatory protections. The source presents this as relevant to creating a more resilient and comprehensive EU crypto regulatory framework.
Key context
MiCA currently mandates e-money token issuers to keep at least 30% of reserves in commercial bank deposits, with a 60% minimum for significant issuers. Circle, aligning with the European Central Bank, suggests replacing fixed deposit minimums with more flexible liquidity requirements and removing exposure caps imposed by MiCA. The consultation also gathered broader industry input on regulating crypto derivatives and stablecoin classification.
Key numbers and entities
Circle (stablecoin issuer of USDC and EURC), European Commission, MiCA regulation, European Central Bank, Silicon Valley Bank, Hyperliquid Policy Center, Global Blockchain Business Council, Markets in Financial Instruments Directive (MiFID II). Specifically, $3.3 billion of Circle’s reserves were held at Silicon Valley Bank during the March 2023 incident.
What remains unclear
The source does not specify how the European Commission will respond to Circle’s recommendations or when revisions to MiCA might be implemented. Details on how the proposed flexible liquidity requirements would operate are not provided. The source also lacks information on other consultation responses beyond the industry groups mentioned.