Circle urges EU to amend MiCA stablecoin reserve rules

Circle, the issuer of USDC and EURC, is calling on the European Commission to amend specific provisions of the Markets in Crypto-Assets (MiCA) regulation. The company argues that current rules regarding stablecoin reserves create unnecessary vulnerabilities by forcing issuers to rely heavily on commercial banks.

Under MiCA, stablecoin issuers are required to hold between 30% and 60% of their reserves as deposits in commercial banks, depending on the significance of the asset. Circle warns that this mandate exposes issuers to banking sector instability. The company cited the March 2023 collapse of Silicon Valley Bank, which caused USDC to temporarily lose its peg to the dollar when $3.3 billion in reserves were held at the institution.

Circle is advocating for a shift from fixed bank deposit percentages toward requirements based on the liquidity of reserve assets. This position aligns with the European Central Bank (ECB), which also seeks to replace fixed percentages with liquidity requirements that ensure reserves can be made available within specific timeframes.