Circle Challenges EU Stablecoin Rules, Citing Banking Sector Risks

Circle, the issuer of USDC stablecoin, has pushed back against the European Union's MiCA regulation, which requires large stablecoin issuers to hold at least 60% of their reserves in commercial bank deposits.

Circle argues that this requirement exposes stablecoin reserves to greater credit and counterparty risks in the banking sector. The company cites the collapse of Silicon Valley Bank as an example, where approximately $3.3 billion in USDC reserves remained with the bank, causing the token to briefly lose its $1 peg.

Circle is advocating for a more flexible system based on asset liquidity instead of a fixed-rate deposit requirement. This would allow a certain portion of reserves to be cashed out within one to five business days, rather than a strict minimum deposit requirement for bank deposits.