UPDATE: Circle proposes dynamic liquidity rules as ESMA seeks freeze powers under MiCA
CIE News ·
Circle proposed dynamic liquidity benchmarks based on redemption speeds to replace fixed bank deposit quotas under MiCA, while ESMA recommended gaining authority to freeze transactions.
As previously reported, Circle submitted regulatory filings to the European Commission regarding the Markets in Crypto-Assets regulation. According to crypto.news, the USDC and EURC issuer is advocating for dynamic liquidity benchmarks linked to redemption speeds instead of fixed commercial bank deposit mandates. Circle argued that requiring issuers to store 30% to 60% of reserves in commercial banks creates unnecessary credit and counterparty risks.
The European Securities and Markets Authority has also participated in the consultation, recommending expanded supervisory powers that include freezing transactions and domains. Meanwhile, European central banks suggested models establishing minimum reserve asset proportions maturing within one and five business days to manage redemption pressures without fixed bank deposit quotas.
Circle additionally urged regulators to reconsider provisions capping single-sovereign exposure at 35% and limiting deposits with an individual bank to 1.5% of the lender's total assets. The firm stated that these caps restrict access to liquid government-backed assets and compel large issuers to maintain relationships with numerous banking partners.