Circle Urges European Commission to Ease MiCA Bank Deposit Rules After Silicon Valley Bank Scare

Stablecoin issuer Circle has officially called upon the European Commission to revise its stringent reserve requirements as part of an ongoing consultation to review the landmark Markets in Crypto-Assets Regulation (MiCA).

In a public summary of its formal response released on Thursday, the issuer behind popular stablecoins USD Coin (USDC) and EURC argued that mandatory commercial bank-deposit requirements inadvertently expose stablecoin issuers to severe banking-sector credit and counterparty risks. Circle knows these vulnerabilities all too well, having experienced them firsthand in March 2023. At that time, USDC temporarily lost its vital one-to-one dollar peg after the company publicly disclosed that $3.3 billion of its hard-earned reserves were trapped in the collapsing Silicon Valley Bank. Although those funds were ultimately made available after United States authorities stepped in to protect the failed bank’s depositors, the near-miss left a lasting impression on the firm and heightened industry-wide concerns regarding over-reliance on traditional banking institutions.

The European Commission’s targeted consultation, which officially closed on Wednesday, was designed to gather critical feedback from industry participants, financial institutions, and the public on how MiCA is currently functioning in practice. Regulators sought to determine whether the framework remains entirely fit for purpose as the broader digital asset market continues to evolve and mature. The comprehensive feedback collected during this review period will directly inform the Commission’s ongoing assessment of the regulation, as well as its potential consideration of financial activities and digital assets that currently fall outside MiCA’s established scope.

Circle Aligns With Central Bank on Reserve Requirements

Under the current text of the MiCA framework, e-money token issuers are legally required to hold at least 30% of their total reserves in the form of commercial bank deposits. For significant stablecoin issuers, that mandatory minimum threshold increases significantly to 60%, according to operational data highlighted by Circle.

In its submission, Circle backed a comprehensive reconsideration of these mandatory deposit minimums, advocating instead for their replacement with a more flexible minimum asset liquidity requirement. In taking this stance, the stablecoin giant found itself in rare agreement with the European Central Bank, which has similarly expressed caution regarding the concentration of stablecoin reserves within traditional commercial banks.

Furthermore, Circle called for the removal of two specific reserve concentration limits that currently encumber issuers. The first is a rigid 35% cap on financial exposure to a single sovereign entity, while the second is a strict ceiling on deposits held with any single counterparty, limiting them to an equivalent of just 1.5% of that specific bank’s total assets.

Beyond structural reserve adjustments, the stablecoin issuer also urged the European Commission to explicitly preserve what the industry refers to as "multi-issuance." This operational model allows an entity authorized within the European Union and a foreign-regulated counterpart to co-issue a single stablecoin. Circle argued that restricting or outright banning this cooperative structure would likely backfire, pushing European users away from regulated, compliant options and directly toward offshore providers operating entirely outside the protective guardrails of MiCA.

Industry Groups Seek Changes to Onchain Market Rules

Circle is far from the only major industry stakeholder pushing for targeted adjustments to the European regulatory landscape. Other prominent advocacy and policy groups have weighed heavily into the Commission’s consultation, targeting distinct areas of the digital asset economy ranging from decentralized finance to derivative markets.

The Hyperliquid Policy Center also submitted a detailed response to the consultation, urging the European Commission to integrate crypto perpetual futures directly under the European Union’s existing securities and derivatives framework, widely known as the second Markets in Financial Instruments Directive, or MiFID II. The group advocated for the creation of regulatory requirements specifically tailored to the unique market structure of perpetual futures. Additionally, the policy center called for official regulatory recognition of public blockchain records as a valid, reliable method to satisfy existing transparency and recordkeeping obligations.

Meanwhile, the Global Blockchain Business Council (GBBC) used the consultation period to recommend clearer token classifications, more proportionate stablecoin safeguards, and a reduction in regulatory duplication between MiCA and traditional payment-services rules. When addressing the complex topic of cross-border stablecoin issuance, the GBBC specifically called for clear redemption responsibilities, enforceable mechanisms for reserve rebalancing, and a highly accountable EU supervisory framework to protect consumers without stifling cross-border innovation.