Circle Wants EU’s 30% Stablecoin Reserve Rule Swapped for Liquidity Test - The Cryptonomist

Circle, the issuer of the USDC stablecoin, is reportedly urging European Union regulators to replace a proposed requirement that stablecoin issuers hold 30% of reserves in bank deposits with a more flexible liquidity-based standard. The debate centers on how to ensure that a stablecoin can meet redemption demands without mandating a fixed share of reserves sit in any single asset class.

The proposal matters because reserve rules directly shape the cost and operational model of issuing stablecoins in the EU. A rigid 30% bank deposit floor could push issuers toward holding large balances at a small number of credit institutions, concentrating exposure rather than diversifying it. A liquidity test, by contrast, would assess whether reserves can be converted into cash quickly enough to handle redemptions, potentially allowing a broader mix of high-quality assets.

For markets, the outcome could influence where stablecoin issuance and reserves are domiciled, how much issuers earn on reserve assets, and how competitive EU-licensed tokens are against offshore alternatives. What to watch: the final text of the EU's stablecoin rules, how regulators define qualifying liquid assets, and whether other major issuers align with Circle's position.