Stablecoin issuer Circle has urged the European Commission to revise the reserve requirements set out in the Markets in Crypto-Assets Regulation (MiCA), in its response to the bloc's targeted consultation on reviewing the framework. MiCA is the EU's comprehensive crypto-asset rulebook, with its provisions for stablecoins applying since June 2024.

In a summary of its submission published on Thursday, the USDC and EURC issuer argued that mandatory bank-deposit requirements expose stablecoin issuers to credit and counterparty risks within the banking sector.

Circle said it experienced those risks firsthand in March 2023, when USDC temporarily lost its dollar peg after the company disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank. The funds were subsequently made available after US authorities moved to protect the bank's depositors.

The European Commission's consultation, which closed on Wednesday, sought feedback on how MiCA is working in practice and whether it remains fit for purpose as crypto markets develop. Responses will inform the Commission's assessment of the regulation and of activities falling outside its current scope.

Circle aligns with central bank on reserve requirements

According to Circle, MiCA currently requires e-money token issuers to hold at least 30% of their reserves in commercial bank deposits, with a higher minimum of 60% for significant issuers. E-money tokens are the category MiCA applies to stablecoins referencing a single fiat currency, such as the dollar-pegged USDC and the euro-denominated EURC.

The company backed reconsidering the mandatory deposit minimums and replacing them with a more flexible minimum asset liquidity requirement, a position that puts it in agreement with the European Central Bank.

Circle also called for the removal of two reserve concentration limits: a 35% cap on exposure to a single sovereign, and a ceiling on deposits with each counterparty equivalent to 1.5% of that bank's total assets.

The issuer additionally urged the Commission to preserve “multi-issuance,” a structure in which an entity authorized in the European Union and a foreign-regulated counterpart co-issue a stablecoin. Restricting that arrangement, Circle argued, would push users toward offshore providers operating outside MiCA's protections.

Industry groups seek changes to onchain market rules

Circle not the only respondent seeking changes. The Hyperliquid Policy Center also responded to the consultation, urging the Commission to treat crypto perpetual futures under the EU's existing securities and derivatives framework, the second Markets in Financial Instruments Directive (MiFID II). The group called for requirements tailored to perpetual futures' market structure and for the recognition of public blockchain records as a way to meet transparency and recordkeeping obligations.

The Global Blockchain Business Council (GBBC) recommended clearer token classification, proportionate stablecoin safeguards and less duplication between MiCA and payment-services rules. On cross-border stablecoin issuance, the GBBC called for clear redemption responsibilities, enforceable reserve rebalancing and an accountable EU supervisory framework.