Stablecoin Issuer Advocates for Flexible Reserve Requirements in EU Regulation Overhaul

Circle, the issuer of USDC and EURC stablecoins, has petitioned the European Commission to replace rigid bank-deposit minimum requirements with a more flexible liquidity-based standard for stablecoin reserves. Under the current MiCA framework, issuers must hold at least 30% of reserves in bank deposits, with that threshold rising to 60% for significant tokens, requirements Circle argues expose firms to unnecessary counterparty risk. The proposal aligns with positions from European central banks, which have similarly advocated for reserve maturity windows rather than fixed deposit percentages.

Circle's petition addresses a core tension in EU stablecoin oversight: whether rigid structural mandates or flexible performance standards better protect the financial system. The company contends that forcing issuers to concentrate 30-60% of reserves in bank deposits creates concentrated counterparty exposure, arguing that a liquidity-focused approach—measuring how quickly reserves can be mobilized rather than where they sit—would achieve safety objectives without constraining asset allocation decisions.

European central banks have signaled alignment on scrapping fixed deposit percentages but diverge sharply on Circle's broader agenda. Rather than loosening concentration rules as Circle proposes, monetary authorities worry that loosened requirements could allow stablecoin runs to cascade into banking stress. They're exploring tighter counterparty limits and potential sector-wide caps on stablecoin deposits that individual banks can hold.