Circle, the issuer of USDC and EURC, submitted a formal response to the European Commission’s consultation on reviewing the Markets in Crypto-Assets Regulation (MiCA). The company argued that current mandatory bank-deposit requirements expose stablecoin issuers to unnecessary banking-sector credit and counterparty risks. Circle cited its own experience during the March 2023 Silicon Valley Bank collapse, when $3.3 billion of its reserves were held at the failed institution, causing USDC to temporarily lose its dollar peg before authorities protected depositors.
Under existing MiCA rules, e-money token issuers must hold at least 30% of reserves in commercial bank deposits, rising to 60% for significant issuers. Circle proposed replacing these fixed minimums with a more flexible asset liquidity requirement, aligning with the European Central Bank’s stance. The firm also requested the removal of two 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. Additionally, Circle urged the Commission to preserve "multi-issuance" structures, warning that restricting them would drive users toward offshore providers outside MiCA’s protections.
The push to decouple stablecoin reserves from rigid banking deposit mandates reflects a growing tension between financial stability objectives and operational resilience in crypto markets. By highlighting the specific vulnerabilities exposed during the Silicon Valley Bank crisis, Circle argues that forcing issuers into traditional banking channels reintroduces systemic risks that decentralized finance was designed to mitigate. This position challenges the regulatory assumption that bank deposits are inherently safer than other liquid assets, suggesting instead that flexibility in reserve composition is critical for maintaining peg integrity during broader market stress events.
If the European Commission adopts these recommendations, it could significantly alter the competitive landscape for compliant stablecoins within the EU. Relaxing concentration limits and deposit minimums may lower barriers to entry for new issuers while potentially increasing the complexity of supervisory oversight. Conversely, rejecting these changes might accelerate the migration of institutional capital toward non-EU jurisdictions or alternative settlement mechanisms, undermining MiCA’s goal of creating a unified, secure domestic market for digital assets.
