Circle Urges EU to Fast-Track DLT Reforms & Stablecoin Rules

• Circle has called on European regulators to speed up the implementation of digital asset reforms to prevent institutional capital from shifting to the United States.
• The firm recommends expanding the use of MiCA-compliant stablecoins for securities settlement, including those denominated in euros.
• Key proposals include establishing adaptive thresholds for the DLT Pilot Regime and limiting ESMA oversight to large, cross-border entities.

Accelerating the DLT Framework

In a formal response submitted on March 20 regarding the European Commission’s Market Integration Package, stablecoin issuer Circle emphasized the need for a more agile regulatory environment. While the company acknowledged the package as a positive step toward modernizing capital markets, it warned that existing gaps in scalability and supervision could hinder institutional adoption. Circle specifically urged policymakers to fast-track updates to the Distributed Ledger Technology (DLT) Pilot Regime, suggesting that current volume limits are too restrictive for meaningful liquidity.

Instead of static legislative updates, Circle proposed the introduction of adaptive thresholds that adjust based on real-world market conditions. The firm also highlighted the importance of creating a transparent transition path from the pilot phase to a permanent regulatory framework. Failure to act quickly, the firm noted, could result in onchain infrastructure development moving to jurisdictions like the United States, where progress is perceived to be moving at a faster pace.

Expanding Stablecoin Utility in Settlements

A major portion of Circle's feedback focused on the role of stablecoins in the cash-leg of securities settlement. While the firm welcomed the recognition of e-money tokens, it cautioned against rules that would only allow "significant" tokens to be used. Such a restriction could effectively exclude euro-denominated stablecoins from the market, thereby slowing the broader adoption of tokenized assets.

Furthermore, Circle advocated for broadening the types of institutions allowed to offer settlement accounts. The firm argued that permitting Crypto Asset Service Providers (CASPs)—rather than just traditional banks and central securities depositories—to handle these accounts would reduce friction and simplify the technical complexity of onchain transactions.

Supervision and Collateral Standards

Regarding regulatory oversight, Circle proposed a more decentralized approach to supervision within the EU. The firm suggested that the European Securities and Markets Authority (ESMA) should focus its direct oversight on large, cross-border firms, while smaller, local participants should remain under the jurisdiction of national regulators.

Additionally, the company called for clear guidelines that would allow stablecoins to be utilized as collateral. This move would align the European Union with similar regulatory explorations currently taking place in the United Kingdom and the United States, ensuring that European markets remain competitive in the global digital finance landscape.