Circle and the Hyperliquid Policy Center are making waves in the European regulatory landscape by advocating for significant changes to the EU’s Markets in Crypto-Assets Regulation (MiCA). Their recent requests come during the European Commission’s review of MiCA, a critical framework for crypto regulation in the region.
As the consultation period closed on September 30, key players in the crypto space submitted their feedback, with Circle focusing on the stringent reserve requirements imposed on stablecoin issuers. Currently, MiCA mandates that issuers maintain at least 30% of reserves in bank deposits, escalating to 60% for stablecoins deemed “significant” by the European Banking Authority. Circle argues that these rules compel stablecoin issuers to excessively rely on commercial banks, heightening exposure to banking risks.
Circle’s concerns are underscored by its own experience in March 2023, when the USDC stablecoin momentarily lost its dollar peg due to $3.3 billion of its reserves being trapped at Silicon Valley Bank. In its submission, Circle pointed out that only three out of the top 30 global stablecoins—USDC, USDG, and EURC—currently comply with MiCA standards, emphasizing the need for a more flexible regulatory environment.
Circle Advocates for Flexible Reserve Requirements
In lieu of the current bank deposit floor, Circle proposes a liquidity-based rule that would prioritize the speed at which assets can be liquidated, rather than their location. This suggestion aligns with the European Central Bank’s recent proposal, which recommends that a portion of reserves should mature within one to five working days, rather than being locked in bank deposits.
Furthermore, Circle has urged the EU to continue allowing multi-issuance of stablecoins. This practice enables a MiCA-licensed entity to issue a stablecoin alongside a foreign affiliate under a unified global brand. Circle warns that restricting multi-issuance could drive users toward unregulated offshore stablecoins, a concern echoed in the Commission’s own assessments.
Alongside these recommendations, Circle is calling for the removal of two technical caps that limit exposure to a single government and to any one bank, further advocating for a more dynamic regulatory framework.
Hyperliquid Seeks Clarity on Perpetual Futures
Meanwhile, the Hyperliquid Policy Center has submitted its own response, targeting the regulation of perpetual futures contracts, commonly known as perps. The center argues that these products should be classified under MiFID II, the EU’s existing derivatives framework established in 2014, rather than being subjected to MiCA’s provisions.
Hyperliquid emphasizes that the evaluation of perps should be based on their economic characteristics rather than the blockchain technology they utilize. They argue that existing MiFID II categories are sufficient to cover these products without necessitating new legislation. Additionally, the center urges the EU to refrain from applying contracts-for-difference rules to perps, citing the differences in trading mechanisms between the two products.
Other firms have also contributed to the consultation, with Deutsche Börse Group advocating for a new category for stablecoins utilized in settlement systems and Chamber of Progress supporting the continuation of multi-issuance and the potential for interest payments on e-money tokens.
As the European Commission evaluates these responses, a timeline for future actions remains to be established. The outcomes of this review could shape the regulatory landscape for crypto assets in Europe and beyond.
