Circle Pushes EU Regulators to Overhaul Stablecoin Reserve Requirements

Circle, the issuer of USDC and EURC, has urged European regulators to overhaul reserve requirements for stablecoins. The company argues that current rules force issuers to take on avoidable exposure to the banking system.

In a submission to the European Commission's consultation on the Markets in Crypto-Assets Regulation, Circle called for replacing fixed bank-deposit minimums with a more flexible liquidity standard.

The push comes as Brussels reviews the landmark crypto framework, which took full effect for stablecoin issuers in 2024. Circle's filing zeroes in on provisions requiring e-money token issuers to hold at least 30% of reserves in commercial bank deposits, with the threshold climbing to 60% for issuers designated as significant under European Banking Authority criteria.

Circle contends that deposit-heavy reserve structures transfer risk from crypto infrastructure into the banking sector rather than eliminating it. The company pointed to its own experience during the March 2023 banking turmoil as evidence. When Silicon Valley Bank collapsed, Circle disclosed that $3.3 billion of USDC reserves were held at the institution, triggering a temporary loss of the token's dollar peg.

The episode demonstrates how reserve concentration in vulnerable banks can escalate into token instability within days. The company's submission frames the incident not as an argument against bank deposits entirely, but against regulatory mandates that lock issuers into deposit-centric reserve structures.