Circle Seeks MiCA Overhaul to Protect Stablecoin Issuers from Banking Risks

Circle, the issuer of USDC and EURC, has urged the European Commission to rethink key parts of the Markets in Crypto-Assets Regulation (MiCA) during its review process. The company argues that MiCA's current reserve rules for certain stablecoins create unnecessary exposure to bank-sector credit and counterparty risk. Circle cited its own experience during the 2023 banking turmoil, when USDC briefly lost its dollar peg after Circle disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank.

Circle is proposing that MiCA's reserve rules be changed to a more flexible 'minimum asset liquidity' standard, which would align with the European Central Bank's thinking. The company also recommends removing two reserve concentration limits: 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 is also advocating for the preservation of 'multi-issuance' models, which allow an entity authorized under EU rules to co-issue a stablecoin with a foreign-regulated counterpart. The company argues that restricting this arrangement would likely push users toward providers located outside MiCA's perimeter, undermining the regulation's purpose of bringing stablecoin activity under a consistent supervisory regime.