The CEO of the second-largest stablecoin by market capitalization raises concerns about European regulation, citing potential risks of destabilizing the sector.
According to DL News, Circle, the company behind USDC, the second-largest stablecoin by market capitalization, has expressed serious concerns about the European Union’s MiCA regulation.
Despite obtaining regulatory approval a few weeks ago, during a meeting with European legislators in Brussels, CEO Jeremy Allaire expressed fears about the potential destabilization of the stablecoin sector.
Circle’s concerns center around the MiCA’s reserve requirements, which oblige stablecoin issuers to hold a significant portion of their assets in bank deposits, distributed across multiple current accounts within the EU. Circle argues that this provision, particularly the 60% requirement for large stablecoin issuers, introduces major risks to the banking system.
Patrick Hansen, Circle’s EU strategy lead, emphasized that bank deposits inherently carry credit and counterparty risks. According to Hansen, even the European Banking Authority has recognized these risk factors. He believes that a first revision of the requirements could occur next year, with a more comprehensive review of MiCA in the next 2-3 years.
Circle echoes Tether
The concerns expressed by Circle’s CEO follow similar comments made by Paolo Ardoino, CEO of Tether, as reported by Atlas21 during the BTC Prague 2024 conference.
Regarding the risks that the MiCA regulation might introduce, Ardoino commented:
“The issue with this regulation is that instead of reducing systemic risks for banks, it’s increasing the risks of a bank run.”
In the excerpt, Ardoino discusses with Atlas21 the problems he believes the MiCA regulation would introduce for banks and stablecoins.
Latest updates
Due to the implementation of rules established by MiCA, on October 4, Coinbase announced the delisting of all unauthorized stablecoins by December 30. Meanwhile, other exchanges such as OKX, Bitstamp, and Uphold have already started restricting access to Tether within the European region. European users will no longer be able to use stablecoins like USDT, PAXG, PYUSD, and DAI on regulated exchanges.
On November 27, Tether itself ceased issuing EUR₮, its euro-pegged stablecoin, and is reportedly developing a “technological solution” to address the complexities introduced by the new regulatory framework.
On November 28, Coinbase announced that the yield services offered on USDC to European users will be discontinued starting November 30.
