Circle Seeks MiCA Overhaul for Stablecoin Reserve Rules

Circle, the issuer of stablecoins USDC and EURC, is calling for changes to the European Commission's Markets in Crypto-Assets Regulation (MiCA). In a response submitted as part of the MiCA review process, Circle argued that the current reserve rules for certain stablecoins create unnecessary exposure to bank-sector credit and counterparty risk.

Circle pointed out that under MiCA, e-money token issuers are required to hold at least 30% of their reserves in commercial bank deposits. The company cited its own experience during the 2023 banking turmoil as an example of how deposit-heavy reserve structures can transfer risks from crypto infrastructure to the banking system.

Circle's proposal centers on shifting from fixed deposit minimums toward a more flexible 'minimum asset liquidity' standard, which would better reflect the goal of ensuring stablecoin redemptions can be met under stress. The company also called for removing two reserve concentration limits embedded in the existing framework: a 35% cap on exposure to a single sovereign and a deposit cap with each counterparty set at an amount equivalent to 1.5% of that bank's total assets.

Circle emphasized the importance of preserving 'multi-issuance' models, through which an entity authorized under EU rules can co-issue a stablecoin with a foreign-regulated counterpart. This approach would ensure that users are not pushed toward providers located outside MiCA's perimeter, undermining the regulation's purpose of bringing stablecoin activity under a consistent supervisory regime.