Circle Urges MiCA Reserve Changes, Warns Mandatory Bank Deposits Increase Risk

Summary

• Large stablecoin inflows into Binance rose 40.6%, reaching $30.5 billion as Darkfost identified potential buying demand from major cryptocurrency investors.
• Latest deposits remain below half the previous October peak, indicating large investors are returning more cautiously than during earlier activity.
• Darkfost cites conflict, inflation, and rising bond yields as possible reasons for caution, while deposits leave actual Bitcoin purchases.

Circle has urged the European Commission to revise MiCA’s reserve rules, warning that bank deposits expose issuers to banking risks. According to its October 1 response summary, requirements increase stablecoin issuers’ exposure to bank credit and counterparty risks.

MiCA requires e-money token issuers to hold 30% of reserves in bank deposits, rising to 60% for significant issuers. Circle backed replacing these thresholds with liquidity requirements, aligning its recommendation with the European Central Bank’s position.

Additionally, it requested removing the 35% single-sovereign exposure cap and deposit limits equivalent to 1.5% of each bank’s total assets. Circle argued that these restrictions complicate reserve management and require larger issuers to establish relationships with banking counterparties.

Banking exposure affected Circle in March 2023, when USDC lost its dollar peg during Silicon Valley Bank’s collapse. The company held $3.3 billion at the bank before US authorities protected depositors and restored access to those reserves.

Also Read: South Korea Proposes Tokenized Securities Capital Rules and Retail Trading Cap

Circle Seeks Cross-Border Issuance Safeguards as Industry Proposes Wider Revisions

Beyond reserves, Circle urged policymakers to preserve joint stablecoin issuance between EU-authorized entities and their foreign-regulated counterparts. It warned that restrictions could push European users toward offshore providers outside MiCA’s protections.

Meanwhile, the Global Blockchain Business Council requested clearer token classifications, proportionate safeguards and reduced overlap with payment-services rules. Its cross-border recommendations included redemption responsibilities, enforceable reserve rebalancing and accountable European supervision.

Separately, the Hyperliquid Policy Center requested tailored perpetual futures requirements under MiFID II and recognition of blockchain records.

Binance Faces Scrutiny Over European Operations Without MiCA Authorization

European regulators are examining whether Binance can serve European customers through offshore entities without MiCA authorization. According to 36crypto, authorities asked Binance to justify relying on reverse solicitation, which requires customers to initiate requests independently.

ESMA and regulators in France, Germany, and Greece are examining this practice without establishing a violation. Binance withdrew its Greek application before approval and lacked authorization when MiCA’s transition period ended. The Commission closed its consultation on September 30, and the responses informed its assessment and legislative proposals.

Also Read: Binance Whale Stablecoin Inflows Jump 40% as Bitcoin Buying Capacity Builds