Circle, a key player in the stablecoin industry and provider of blockchain financial infrastructure, has offered substantial feedback to the European Commission’s Market Integration Package, aiming to bolster the EU’s approach to digital assets. Famous for its stablecoins USDC and EURC, Circle’s input focuses on facilitating capital market expansion within the EU.
How Should DLT Pilot Regime Evolve?
Circle has addressed pivotal aspects in its recommendations, notably the Distributed Ledger Technology (DLT) Pilot Regime. The company supports the expansion but critiques the volume thresholds that may deter institutional participation. Circle advocates for adaptive thresholds that evolve based on market changes and supervisory reviews, ensuring that the framework remains relevant and market-responsive.
The lack of detailed follow-up actions post-2030 in ESMA’s reporting leaves long-term strategies ambiguous, posing risks for extended investments. Circle stresses the importance of clear routes from pilot stages to established regulations to foster confidence among market players.
Why Limited EMT Settlement Access Poses Risks?
In the realm of electronic money tokens (EMTs), Circle supports their inclusion under MiCA but raises concerns about restricted settlement access to only “significant” EMTs. The absence of euro-denominated EMTs meeting these criteria is flagged as an obstacle to broader market development.
Circle explained that,
“Restricting settlement via central securities depositories to ‘significant’ EMTs risks excluding euro-denominated EMTs, essentially creating a circular problem that prevents their market development.”
To address this, Circle suggests that Crypto-Asset Service Providers be allowed to manage cash for settlements, aligning with European Banking Authority guidelines and promoting competitive participation.
Is New Legislation Needed for Collateral Use?
Circle argues for focused oversight, recommending ESMA’s supervision for large-scale crypto providers with systemic risk potential. For smaller entities, national regulators should manage oversight to ensure flexibility. Circle notes that adding uncoordinated layers of supervision could counteract efficiency and growth aims.
An update to the collateral framework is also proposed. Circle urges for EMTs to be deemed eligible collateral under EU regulations, akin to initiatives in the U.S. and UK. Such legislative alignment is seen as crucial for the EU to remain competitive in digital asset integration.
The call for adaptive regulatory measures includes:
– Implementation of adjustable thresholds in the DLT regime to enhance institutional participation.
– Harmonization of CSD regulations with DLT frameworks to broaden settlement provider options.
– Coordination of market supervision to streamline administrative complexity.
Circle’s recommendations highlight the need for adaptive mechanisms and regulatory synergy to encourage digital asset market evolution in the EU. The proposals are aimed at invigorating institutional confidence and positioning the EU as a forward-thinking market leader.
