Circle Calls for EU Stablecoin Reserve Rule Reforms

Circle has urged the European Commission to reconsider parts of the Markets in Crypto-Assets Regulation (MiCA) framework for stablecoin reserve rules. The company argues that rigid requirements tied to bank deposits can expose issuers, and indirectly token holders, to banking-sector credit and counterparty risk.

Circle points out that its experience during the Silicon Valley Bank collapse in March 2023 is a real-world stress test for MiCA's deposit-minimum approach. At the time, Circle disclosed that $3.3 billion of USDC reserves were held at SVB, leading to a temporary loss of the stablecoin's dollar peg.

Circle says it aligns with the European Central Bank's view that issuers should face a 'minimum asset liquidity requirement' rather than fixed deposit minimums. The company wants MiCA's reserve structure to better account for the risk that even well-regulated stablecoin reserves can become vulnerable when they are concentrated within bank balance sheets.

Circle also asked the Commission to remove two reserve concentration limits that it says can restrict portfolio flexibility without necessarily improving real-world safety. These include a 35% cap on exposure to a single sovereign and a cap tied to each counterparty, limiting deposits with a single bank to an amount equivalent to 1.5% of that bank's total assets.