USDC Issuer Circle Objects to Europe’s Stablecoin Rule: Could the 60% Reserve Requirement Change?

Circle argued that the bank deposit requirement imposed on large stablecoin issuers increases risks. The European Union is reassessing the MiCA rules.

$USDC issuer Circle has requested changes to the bank deposit requirements applied to stablecoin reserves under the European Union’s MiCA regulation. In its submission to the European Commission’s MiCA review, the company proposed a more flexible system based on asset liquidity instead of a fixed-rate deposit requirement.

Current regulations require e-money token issuers to hold at least 30% of their reserves in commercial bank deposits. For major stablecoins classified as “material” by the European Banking Authority, this figure can rise to 60%.

According to Circle, this regulation exposes stablecoin reserves to greater credit and counterparty risks in the banking sector. The company cites the 2023 Silicon Valley Bank collapse, where approximately $3.3 billion in $USDC reserves remained with the bank, causing the token to briefly lose its $1 peg, as an example of these risks.

Circle is advocating for the consideration of a liquidity requirement that allows a certain portion of reserves to be cashed out within one to five business days, rather than a strict minimum deposit requirement for bank deposits. The European Central Bank and some national central banks also support a similar approach.

The company also objected to the rule limiting reserve exposure to a single country’s government bonds to 35 percent. Circle argues that this limit makes it difficult for a dollar-based stablecoin to hold a significant portion of its reserves in US Treasury bonds.

As part of the same review, the Hyperliquid Policy Center also requested that perpetual futures contracts on the chain be evaluated under the existing MiFID II derivatives rules instead of MiCA.

These are requests submitted by industry organizations. This does not mean that the European Commission has accepted the proposals or amended the MiCA rules. A formal assessment and potential legislative process will need to be completed before a final decision is made.

*This is not investment advice.