Circle Seeks MiCA Overhaul on Stablecoin Reserve Rules

Circle, the issuer of the USDC and EURC stablecoins, has urged the European Commission to revise the reserve requirements for e-money token issuers in the Markets in Crypto-Assets Regulation (MiCA).

In its response to a consultation on reviewing MiCA, Circle argued that mandatory bank-deposit requirements expose stablecoin issuers to banking-sector credit and counterparty risks.

Circle pointed to its own experience in March 2023, when USDC temporarily lost its dollar peg after the company disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank. The funds were subsequently made available after US authorities protected the bank's depositors.

Circle backed reconsidering the mandatory deposit minimums and replacing them with a more flexible minimum asset liquidity requirement, in line with the European Central Bank's views.

The company also called for removing two reserve concentration limits, which 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.