Key Takeaways
- Circle has formally requested the European Union ease MiCA’s stablecoin reserve mandates, specifically the 30% to 60% banking deposit requirements.
- The Hyperliquid Policy Center advocates for perpetual futures to fall under MiFID II regulations rather than MiCA oversight.
- According to Circle, merely three stablecoins among the global top 30 currently comply with MiCA’s standards.
- The European Central Bank has expressed support for reducing the minimum bank deposit threshold for stablecoin providers.
- The deadline for the European Commission’s MiCA regulatory review submissions was September 30.
Two prominent crypto entities, Circle and the Hyperliquid Policy Center, have formally urged European authorities to revise key provisions within the EU’s cryptocurrency regulatory framework. Their submissions were delivered during the European Commission’s ongoing examination of the Markets in Crypto-Assets Regulation, commonly referred to as MiCA.
The official consultation window concluded on September 30, with numerous companies filing their feedback in the closing days leading up to the cutoff date.
Circle, the entity behind the USDC stablecoin, concentrated its submission on addressing reserve obligation concerns. The firm contends that existing regulations compel stablecoin providers to maintain excessive cash holdings within traditional commercial banking institutions.
MiCA’s current framework mandates that issuers preserve a minimum of 30% of their reserves in bank deposits. This threshold escalates to 60% for stablecoins designated as “significant” by the European Banking Authority.
Circle contends this structure amplifies vulnerability to banking sector instability. The company referenced its own situation in March 2023, when USDC temporarily departed from its dollar parity following the entrapment of $3.3 billion in reserves at Silicon Valley Bank during its collapse.
Circle Advocates for Reserve Requirement Overhaul
According to Circle’s assessment, just three stablecoins within the top 30 globally presently satisfy MiCA’s compliance criteria. These three compliant tokens are USDC, USDG, and EURC.
The firm proposes eliminating the bank deposit minimum in favor of a liquidity-centered framework. This alternative approach would emphasize asset convertibility speed over storage location.
The European Central Bank has expressed alignment with this perspective. It has suggested that a segment of reserves should mature within a one-to-five working day window instead of remaining in bank deposit accounts.
Circle has additionally petitioned the EU to maintain multi-issuance authorization. This mechanism permits a MiCA-authorized entity to issue a stablecoin in conjunction with an international affiliate operating under a unified global brand identity.
The firm cautioned that prohibiting multi-issuance arrangements might drive consumers toward non-EU stablecoins operating beyond European regulatory jurisdiction. It referenced the Commission’s 2020 evaluation, which highlighted this identical risk.
Circle further requested that regulators eliminate two specific technical restrictions. The first limitation caps reserve exposure to any single sovereign government at 35%. The second constraint limits exposure to individual banking institutions to 1.5% of that bank’s aggregate assets.
Hyperliquid Challenges Perpetual Futures Classification
The Hyperliquid Policy Center submitted an independent response addressing perpetual futures contracts, commonly known as perps. The organization advocates for these instruments to be classified under MiFID II, the EU’s established derivatives regulatory structure implemented in 2014.
The center maintains that perps should be evaluated based on their underlying economic characteristics rather than the blockchain infrastructure they utilize. It asserts that existing MiFID II classifications adequately encompass these instruments without requiring additional legislative measures.
The organization also urged the EU to refrain from applying contracts-for-difference regulations to perpetual futures. It emphasized that these two instruments operate under fundamentally different mechanisms, as perps execute through transparent order books rather than bilateral counterparty arrangements.
Additional companies participated in the regulatory review process. Deutsche Bƶrse Group recommended establishing a distinct classification for stablecoins utilized within settlement infrastructure. Chamber of Progress endorsed maintaining multi-issuance permissions and authorizing interest payments on electronic money tokens.
The European Commission has yet to announce a schedule for subsequent actions following the completion of this review period.
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