Circle Calls for Changes to MiCA Stablecoin Regulations
Written with artificial intelligence.
Two years after the MiCA regulations were implemented, Circle is advocating for specific adjustments to reserve requirements for stablecoins. The company argues that modifications are necessary to enhance competitiveness and liquidity in the European market.
Circle's Position on MiCA Regulations
Stablecoin issuer Circle recently submitted its comments to the European Commission regarding the review of the MiCA (Markets in Crypto-Assets) regulation. Circle, which issues the largest USD and Euro e-money tokens authorized under MiCA, reflects on its two years of operational experience. While the EU's regulatory framework initially provided an edge—authorizing approximately 30 e-money tokens—only three of the top 25 global stablecoins by market capitalization are currently regulated under MiCA.
Recommendations for Improvement
Circle proposes targeted enhancements to strengthen the European market's competitiveness and liquidity. A significant point raised pertains to the model of multiple issuance, where a globally circulating stablecoin is issued by an EU entity in collaboration with a foreign counterpart. Circle argues that this structure is currently the only way to maintain global liquidity within the European regulatory framework. Without such flexibility, users may resort to unregulated offshore options, undermining the protections intended by MiCA.
Additionally, Circle recommends establishing a long-term equivalence and recognition regime for foreign regulated stablecoins, similar to existing EU financial market regulations.
Critique of Current Reserve Requirements
Circle also criticizes the current reserve requirements, which mandate that issuers hold at least 30% of reserve assets as bank deposits, with a higher threshold of 60% for significant e-money tokens. This rigid minimum deposit requirement increases credit and counterparty risks associated with the banking sector. In alignment with the European Central Bank's position, Circle advocates replacing this fixed percentage with a more flexible minimum liquidity requirement for assets.
Furthermore, Circle supports the removal of two technical concentration rules: the 35% limit on risk positions in individual government bonds complicates the ability of non-EU currency issuers to maintain high-quality government bonds. The restriction limiting exposure to 1.5% of total bank assets per bank counterparty forces large issuers to manage reserve relationships with multiple institutions, increasing operational complexity. The USDC stablecoin, issued by Circle, boasts a market capitalization of $74 billion, making it the second-largest stablecoin globally, following Tether's USDT.