Circle Demands Overhaul of EU Stablecoin Reserve Rules Amid Banking Risks
Circle, the issuer of USDC and EURC stablecoins, has urged the European Commission to revise reserve requirements for stablecoin issuers in its review of the Markets in Crypto-Assets Regulation (MiCA).
The company's response to a consultation on reviewing MiCA noted that mandatory bank-deposit requirements expose stablecoin issuers to banking-sector credit and counterparty risks. This was evident when 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.
Circle faced significant challenges as a result, with the funds being subsequently made available after US authorities protected the bank's depositors. The company has now called for revising the mandatory deposit minimums and replacing them with a more flexible minimum asset liquidity requirement, in line with the European Central Bank's recommendations.
Additionally, Circle urged the Commission to remove two reserve concentration limits that impose a 35% cap on exposure to a single sovereign and a ceiling on deposits with each counterparty equivalent to 1.5% of that bank's total assets.