Stablecoin issuer Circle has submitted a response to the European Commission’s review consultation on the Markets in Crypto-Assets Regulation, urging the regulator to replace mandatory bank-deposit reserve minimums with more flexible liquidity frameworks.
Circle’s submission, summarized publicly on Thursday, directly challenges the current MiCA reserve structure. Under existing rules, e-money token issuers must hold a minimum 30% of reserves in commercial bank deposits, with that threshold rising to 60% for significant issuers. Circle also flagged the regulation’s 35% cap on exposure to any single sovereign and its 1.5% ceiling on deposits with each counterparty as a percentage of a bank’s total assets.
The issuer’s position aligns with guidance from the European Central Bank, which has itself raised questions about whether mandatory deposit minimums remain appropriate as crypto markets evolve. Circle’s submission also advocates for preserving cross-border stablecoin co-issuance structures, a model that currently underpins its operations across EU member states.
Banking Risk and Reserve Concentration
Circle’s push for regulatory flexibility reflects hard-won lessons from March 2023, when the issuer confronted acute counterparty risk. USDC temporarily lost its dollar peg after disclosure that $3.3 billion of Circle’s reserves were held at Silicon Valley Bank. The funds became available only after US authorities extended deposit protections to all depositors, preventing a broader loss of confidence.
That episode underscored the vulnerability of reserve concentration in a single financial institution, even one perceived as stable. Circle’s current submission suggests that rigid deposit minimums can amplify rather than mitigate systemic risk by forcing issuers into narrow counterparty pools.
Broader Industry Input
Circle is not alone in seeking MiCA revisions. The Hyperliquid Policy Center urged the Commission to treat crypto perpetual futures under the MiFID II framework with tailored requirements rather than blanket application of existing securities rules. The Global Blockchain Business Council recommended clearer token classification criteria, proportionate stablecoin safeguards, and reduced regulatory duplication between MiCA and payment-services directives.
The European Commission opened the MiCA review consultation to gather feedback on whether the regulation remains fit for purpose as digital asset markets continue to develop. The timing of these submissions reflects growing pressure from both issuers and market infrastructure providers to recalibrate rules adopted in 2023 before the full scale of crypto adoption in Europe became apparent.
The Commission has not announced a timeline for completing its assessment of the consultation responses or publishing any proposed amendments to MiCA.
