Circle Seeks Rule Change for USDC Reserves in Europe
Circle, the issuer of USDC stablecoin, has called for changes to reserve rules in Europe. In its submission to the European Commission's consultation on crypto asset regulation MiCA, Circle argued that holding reserves at banks increases exposure to credit and counterparty risk.
The current rules require e-money token issuers to hold at least 30% of their reserves in commercial bank deposits, with a higher ratio for tokens classified as 'significant' by the European Banking Authority. However, after experiencing this risk firsthand when USDC temporarily lost its $1 peg following the collapse of Silicon Valley Bank, Circle is pushing for a more flexible approach.
The company also wants to eliminate the rule limiting exposure to any single government to 35%, which prevents dollar-pegged tokens from weighting their reserves toward government debt instruments like US Treasury securities. Additionally, Circle seeks to preserve the ability of an authorized entity in the EU to jointly issue the same global stablecoin with its regulated subsidiary abroad.
The European Central Bank and national central banks have also proposed eliminating the minimum deposit ratio, instead emphasizing liquidity requirements based on a certain portion of reserves maturing within one and five business days. Circle supports this approach, as well as a more flexible minimum liquidity requirement.