Circle Seeks MiCA Overhaul to Reduce Stablecoin Reserve Risks

Circle, the issuer of USDC and EURC, has called on the European Commission to revise its Markets in Crypto-Assets Regulation (MiCA) due to its current reserve rules for certain stablecoins creating unnecessary exposure to bank-sector credit and counterparty risk.

The company argued that MiCA's mandatory minimum bank-deposit reserve requirements can expose stablecoin issuers to banking credit and counterparty risk, citing USDC's temporary de-peg in March 2023 as an example of how reserve concentration in a single bank can escalate quickly.

Circle proposed shifting from fixed deposit minimums toward a more flexible 'minimum asset liquidity' standard, removing reserve concentration limits, including caps tied to single sovereign exposure and deposits with each counterparty.