EU Stablecoin Rules Under Scrutiny as Circle Seeks Reserve Reforms

Circle, the company behind the popular stablecoin USDC and EURC, has urged the European Commission to revise reserve requirements for stablecoins in its review of the Markets in Crypto-Assets Regulation (MiCA). The proposal aims to replace mandatory bank-deposit minimums with more flexible liquidity rules, which would allow stablecoin issuers to manage their reserves more efficiently.

Circle cited its own experience as a reason for the proposed change. In March 2023, USDC temporarily lost its dollar peg after Circle disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank, exposing it to banking-sector credit and counterparty risks.

The company is also advocating for preserving cross-border stablecoin issuance. The current rules require stablecoins issued in the EU to have a minimum of 1% of their outstanding supply reserved with an EU bank, which can make it difficult for issuers to operate across borders.