Circle CEO has expressed concern over the new crypto regulation law in the EU

What’s new? The head of Circle, which issues USDC stablecoin with a capitalization of $34,2 billion, has expressed concern about the new Markets in Crypto-Assets (MiCA) regulation, the provisions of which have already begun to be applied in the European Union. Thus, according to Jeremy Allaire, the new regulations governing the reserves of stablecoins carry a banking risk.

Material by DL News

What else is known? MiCA requires issuers of stablecoins pegged to fiat currency to keep 30-60% of reserves in cash in multiple bank accounts in the EU. Circle’s head of strategy and policy in the EU, Patrick Hansen, emphasizes that bank deposits involve credit and counterparty risk. He says officials at the banking regulator EBA also recognize this.

Separately, it is emphasized that it is very difficult to find enough bank partners to maintain the necessary reserves. Allaire recalled that it can be difficult for companies in the crypto sector to maintain ongoing partnerships with banks.

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The situation was also complicated by the banking crisis in the United States in 2023 when three banks working with cryptocurrencies collapsed at once: Silvergate Capital, Signature Bank, and Silicon Valley Bank. This increased regulatory scrutiny of the industry.

However, Allaire noted that this would not be a problem for a company that cooperates with several systemically important banks in each major region. He also added that banks themselves want to be more cooperative with crypto firms.

The senior executive also revealed that USDC are being issued separately in the US and EU after MiCA comes into effect, given the differences in rules.

The French regulator issued Circle’s license on July 1 — just after the MiCA regime for stablecoins was introduced. This allows the company to operate across the bloc.

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Earlier this month, Circle added support for the Base network from crypto exchange Coinbase for the euro-pegged stablecoin EURC. Base is the second-largest Layer 2 (L2) network on the Ethereum blockchain, with a total value locked (TVL) of $7,3 billion. Stablecoins account for 41% of that total, according to L2Beat data.