Summary
- Circle has provided feedback to the European Commission regarding the MiCA review, stating that while it has led to numerous regulated issuers, it has not effectively included the largest global stablecoins.
- The company advocates for the continuation of "multi-issuance" to prevent activity from shifting outside the EU and seeks to relax reserve requirements, aligning with the European Central Bank against the proposed 30%-to-60% bank-deposit rule.
- This initiative comes ahead of a significant 2027 overhaul of MiCA and amidst a broader competition between the U.S. and EU for stablecoin market share.
Circle is urging the European Union to amend certain aspects of its cryptocurrency regulations, asserting that the existing framework for stablecoins is excluding major global players from the European market.
On Thursday, the stablecoin issuer announced it had submitted its insights to the European Commission's consultation regarding the review of the Markets in Crypto-Assets Regulation, known as MiCA, which serves as the EU's comprehensive guideline for digital assets.
Circle, which operates the USDC and EURC stablecoins, positioned its recommendations as enhancements to a regulatory framework it believes has given Europe an initial advantage in the crypto space.
The firm contended that MiCA has successfully generated numerous regulated issuers but has not managed to encompass the largest stablecoins globally. Circle pointed out that among the top 25 stablecoins by market capitalization, only three are currently regulated under MiCA.
To bridge this gap, Circle called on the Commission to maintain the "multi-issuance" approach, which allows a stablecoin that circulates globally to be co-issued by an EU-authorized entity in conjunction with its foreign-regulated counterpart, cautioning that imposing restrictions could drive operations offshore.
Circle's most significant concerns revolve around reserve requirements. According to MiCA, e-money token issuers must maintain a minimum of 30% of their reserves in commercial bank deposits, which can rise to 60% for tokens classified as "significant."
The company argued that this requirement heightens exposure to credit risks associated with the banking sector, advocating for a shift towards a more adaptable liquidity standard, in line with the European Central Bank's stance. Additionally, Circle requested the elimination of a 35% limit on exposure to any single sovereign and a regulation that restricts the amount held at any single bank, claiming that these rules would compel large issuers to distribute reserves across numerous banks.
This submission arrives as the EU gears up for a comprehensive MiCA revision. Brussels is anticipated to revise the framework in 2027 to more effectively address foreign stablecoin issuers, while European crypto firms are currently navigating the challenges posed by MiCA's transition period as regulators tighten compliance measures on platforms like Binance.
Moreover, this push highlights a broader competition for stablecoin supremacy, as U.S. issuers expand internationally and the U.S. government increasingly positions dollar-pegged tokens as a means to bolster the global influence of the dollar.