Key Takeaways
- Circle has formally requested the European Union relax stablecoin reserve mandates under MiCA, targeting the 30% to 60% banking deposit requirement.
- The Hyperliquid Policy Center advocates for perpetual futures to fall under MiFID II regulation rather than MiCA.
- According to Circle, just three stablecoins among the global top 30 currently comply with MiCA requirements.
- The European Central Bank has expressed support for reducing the mandatory bank deposit threshold for stablecoin providers.
- September 30 marked the deadline for submissions to the European Commission’s MiCA regulatory review consultation.
Two prominent cryptocurrency organizations have formally petitioned European Union authorities to modify key provisions within the region’s digital asset regulatory framework. Circle and the Hyperliquid Policy Center submitted their proposals during the European Commission’s ongoing evaluation of the Markets in Crypto-Assets Regulation, commonly referred to as MiCA.
The submission window concluded on September 30, with numerous organizations filing their responses during the closing days of the deadline.
Circle, the issuer behind the USDC stablecoin, concentrated its feedback on regulatory requirements governing reserve holdings. The firm contends that existing regulations mandate excessive cash holdings within traditional banking institutions for stablecoin operators.
MiCA currently requires issuers to maintain a minimum of 30% of their reserves as bank deposits. This threshold escalates to 60% for stablecoins that receive a “significant” designation from the European Banking Authority.
Circle argues this framework amplifies vulnerability to banking sector instability. The company referenced its March 2023 incident, when USDC temporarily deviated from its dollar peg following the entrapment of $3.3 billion in reserves at the collapsed Silicon Valley Bank.
Circle Proposes Alternative Reserve Framework
According to Circle’s analysis, merely three stablecoins within the world’s top 30 by market capitalization currently satisfy MiCA compliance standards. These are USDC, USDG, and EURC.
The company advocates for replacing the mandatory bank deposit minimum with a liquidity-focused alternative. Such an approach would emphasize the speed at which assets can be converted to cash rather than their storage location.
The European Central Bank has expressed alignment with this perspective. The institution has suggested that a designated portion of reserves should reach maturity within one to five business days as an alternative to bank deposit requirements.
Circle further urged the EU to preserve multi-issuance practices. This mechanism enables a MiCA-authorized entity to operate a stablecoin in conjunction with an international affiliate under unified global branding.
The firm cautioned that eliminating multi-issuance authorization could redirect users toward non-EU stablecoins operating beyond European regulatory jurisdiction. Circle referenced the Commission’s 2020 evaluation, which identified this identical risk.
Circle also petitioned regulators to eliminate two specific technical restrictions. The first limits reserve exposure to any single government to 35%. The second restricts exposure to individual banks to 1.5% of that institution’s total 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 classifying these instruments under MiFID II, the EU’s established derivatives regulatory structure implemented in 2014.
The center maintains that perpetual futures should be evaluated based on their economic characteristics rather than the underlying blockchain technology. It asserts that existing MiFID II classifications adequately accommodate these products without requiring additional legislative measures.
The organization additionally requested that EU authorities refrain from applying contracts-for-difference regulations to perpetual futures. It emphasized fundamental differences between the products, noting that perps operate through transparent order books rather than single-counterparty arrangements.
Additional industry participants also contributed to the regulatory review. Deutsche Börse Group recommended establishing a distinct category for stablecoins utilized in settlement infrastructure. Chamber of Progress endorsed preserving multi-issuance authorization and permitting interest distributions on e-money tokens.
The European Commission has not yet announced a schedule for subsequent actions following the consultation review.
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