Circle Seeks EU Stablecoin Reserve Rule Overhaul for Liquidity-Based Standard

Circle, the issuer of USDC and EURC, has asked the European Commission to overhaul the EU's stablecoin reserve rules. The company wants to swap the current mandatory bank-deposit allocations for a liquidity-based standard instead. Circle argues that fixed deposit minimums do more harm than good, pushing issuers deeper into banks' credit and counterparty risk. The company proposes a 'less rigid minimum asset liquidity requirement' in place of the current percentage-based mandate.

Under the existing framework, issuers must hold at least 30% of reserves backing ordinary e-money tokens in separate bank accounts. Circle wants to eliminate two concentration thresholds: a 35% cap on exposure to a single sovereign and a restriction capping deposits held at any single bank at 1.5% of that bank's total assets. European central banks share Circle's skepticism about fixed deposit minimums but propose a different fix: a minimum share of reserves to mature within one to five working days.