Only three of the world’s 25 largest stablecoins by market capitalization currently comply with the Markets in Crypto-Assets (MiCA) regulation. This reality has prompted Circle to submit a written response to the European Commission during its review consultation, demanding an overhaul of the stablecoin guidelines.
The issuer of the dollar-backed USDC and euro-backed EURC noted that MiCA did give Europe an early lead on the global stage. However, Circle’s core argument highlighted its shortfall: MiCA produced numerous compliant issuers, yet failed to capture the world’s largest global assets.
Risks Concentrated in Commercial Banks
Circle’s sharpest criticism targeted the reserve custody rules. MiCA requires all e-money token (EMT) issuers to hold at least 30% of their reserve funds as deposits across commercial banks. This minimum requirement jumps to 60% for token issuers deemed significant.
Circle argued that mandating funds to be parked in commercial banks actually increases credit risk exposure to the banking sector itself. This stance aligns with the central bank’s perspective. The European Central Bank (ECB) also intends to replace current reserve rules with more flexible liquidity requirements.
Current MiCA rules limit how much money can be held at a single banking institution. That provision ultimately forces large stablecoin issuers to spread their reserve funds across dozens of different banks. Circle urged the removal of this deposit concentration cap, along with eliminating the 35% limit on exposure to a single sovereign asset.
Preventing an Exodus of Crypto Activity
Beyond reserve deposits, Circle urged European authorities to maintain the multi-issuance model. This framework allows global stablecoin assets to be co-issued by European Union entities and their foreign partners. Circle warned that eliminating this model could trigger companies to shift their issuance activities outside Europe’s borders.
The push for revisions comes as the transitional period for crypto service providers is slated to end by July 1 at the latest. The European Securities and Markets Authority (ESMA) has already instructed national regulators to take strict action against non-compliant firms.
Meanwhile, the European Union only plans to draft broader MiCA revisions in 2027 to find middle ground in handling foreign stablecoin issuers. Initial regulations aimed at protecting the market have instead created new bottlenecks that slow the entry of major players into Europe.
Reported by Decrypt.
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Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
