Circle Urges EU to Lower Stablecoin Limits for Market Growth

• Circle has submitted feedback to the European Commission calling for a reduction in market capitalization thresholds for euro-denominated stablecoins.
• The company warns that current rules create a "chicken-and-egg scenario" that prevents euro-backed tokens like EURC from being used in institutional settlements.
• Proposed changes include expanding the DLT Pilot Regime to allow crypto-asset service providers to manage cash accounts.

Reforming the European Crypto Framework

Stablecoin issuer Circle is advocating for significant adjustments to the European Commission's proposed Market Integration Package (MIP). This initiative is designed to modernize and strengthen capital markets across Europe. In a formal response submitted on March 20, Circle expressed support for the digital financial system but highlighted several structural barriers that could hinder institutional adoption.

The regulatory landscape in Europe is currently dominated by the Markets in Crypto-Assets (MiCA) regulation, which took full effect in December 2024. Despite providing a foundation for the industry, legal experts have noted that MiCA's implementation remains inconsistent across member states, leading to calls for greater clarity through the MIP.

Addressing Market Capitalization Thresholds

Circle’s primary concern involves the Central Securities Depositories Regulation (CSDR), which governs how assets are used in financial settlements. Currently, the framework restricts settlement activities to "significant" e-money tokens (EMTs). Circle points out that no euro-denominated stablecoin, including its own EURC, has yet reached the required market cap threshold to qualify.

By limiting settlement to only the largest tokens, the regulation creates a barrier to entry. Circle argues this stifles growth and reduces secondary market liquidity. To resolve this, the company recommends:

• Transitioning to adaptive thresholds based on liquidity and market uptake rather than fixed market caps.
• Conducting regular supervisory assessments to adjust these levels dynamically.
• Providing clearer guidelines on which crypto-assets can be officially utilized as collateral.

Expanding Access to the DLT Pilot Regime

Beyond stablecoin thresholds, Circle is pushing for reforms to the DLT Pilot Regime. As currently proposed, the regime limits cash account management to traditional credit institutions and central securities depositories. Circle suggests expanding this access to include licensed crypto-asset service providers (CASPs).

According to Circle, bridging the gap between traditional finance and blockchain infrastructure through proportionate regulation is essential for efficiency. The company believes that allowing a wider range of financial participants to operate within the regime will unlock new levels of liquidity and ensure that Europe remains a competitive hub for digital finance.