Circle Seeks EU Stablecoin Overhaul with Recognition Regime

Circle, the issuer of USDC, a dollar-pegged stablecoin with over $74 billion in market capitalization, has submitted recommendations to review the Markets in Crypto Assets (MiCA) regulation in the EU. The company is pushing for less stringent compliance on foreign stablecoins, which it claims would prevent users from fleeing to offshore exchanges. Circle wants the EU to drop heavy bank reserve rules, reducing issuers' exposure to banking sector risk. The current capital requirements for e-money token issuers force these institutions to hold 30% of their reserve assets in commercial banks, with these requirements going up to 60% for 'significant' e-money tokens. Circle disagrees with this requirement, citing that it increases exposure to the credit and counterparty risk of the banking sector.

Circle's proposals aim to establish a recognition regime for foreign stablecoin issuers that would be primarily supervised in their national jurisdiction, with equivalence and recognition from the involved parties and the European Banking Authority (EBA). This would allow local institutions to handle distribution in the EU and enable Euro-based stablecoins to circulate in foreign jurisdictions under the same agreement. Circle's Director, EU Strategy & Policy, Patrick Hansen, warned that failing to maintain the multi-issuance model would incentivize stablecoin users to jump to offshore exchanges where they lack the protections that MiCA was designed to extend.