Stablecoin creator Circle asked the European Commission to alter reserve mandates as part of its feedback for the assessment of the Markets in Crypto-Assets Regulation (MiCA).
Within a Thursday summary of its submission, the organization behind USDC and EURC stated that compulsory bank deposit stipulations leave stablecoins vulnerable to the credit and counterparty perils of the banking industry.
Circle encountered these hazards directly in March 2023, when USDC momentarily slipped from its dollar parity following the revelation that $3.3 billion of its backing assets were deposited at Silicon Valley Bank. Those funds eventually became accessible after American regulators stepped in to safeguard the institution’s depositors.
The consultation, which concluded on Wednesday, gathered opinions regarding MiCA’s performance and its continued suitability as the digital asset space evolves. The collected insights will shape the Commission’s evaluation of the framework and potential measures outside its current framework.
Related: MiCA focus shifts from rulemaking to supervision, ESMA chair says
Circle aligns with central bank on reserve requirements
Presently, MiCA mandates that e-money token creators maintain a minimum of 30% of their reserves inside commercial bank accounts, with a higher threshold of 60% demanded from prominent issuers, according to Circle.
Circle endorsed a reevaluation of these mandatory deposit thresholds, suggesting they be substituted by a more adaptable minimum asset liquidity standard, matching the stance of the European Central Bank.
Furthermore, the firm requested the elimination of two reserve concentration limits that enforce a 35% ceiling on exposure to any single sovereign state alongside a cap on deposits held with each counterparty equal to 1.5% of that specific bank’s aggregate assets.
The stablecoin provider also prompted the Commission to sustain “multi-issuance,” a mechanism whereby an entity authorized inside the European Union collaborates with an internationally regulated counterpart to issue a stablecoin. Placing restrictions on that framework would drive users toward overseas operators lying outside MiCA jurisdiction, Circle cautioned.
Related: 50,000 Europeans call on EU to ease stablecoin rewards restrictions in MiCA review
Industry groups seek changes to onchain market rules
The Hyperliquid Policy Center likewise submitted feedback for the consultation, encouraging the Commission to regulate crypto perpetual futures under existing European securities and derivatives legislation, known as the second Markets in Financial Instruments Directive, or MiFID II.
That organization advocated for mandates customized to the market structure of perpetual futures alongside the formal acknowledgment of public ledger data to fulfill transparency and recordkeeping duties.
Meanwhile, the Global Blockchain Business Council advised for clearer token categorization, balanced stablecoin protections, and minimized redundancy between MiCA and payment service regulations.
Regarding cross-border stablecoin issuance, the GBBC demanded unambiguous redemption accountabilities, enforceable reserve adjustments, and a reliable EU oversight architecture.
Magazine: Stablecoins can drain from banks and nations at lightning speed
Originally published at https://cointelegraph.com/news/circle-eu-stablecoin-reserve-rules-mica-review?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound.
