The head of Circle expressed concern about the new law on crypto regulation in the EU

The Markets in Crypto Assets Act (MiCA) in the European Union requires issuers of fiat-pegged stablecoins to keep between 30% and 60% of cash reserves in multiple EU bank accounts. These measures are aimed at increasing the stability and reliability of cryptocurrencies, but they raise concerns among industry representatives.

Jeremy Allaire, head of Circle, stressed that the new requirements may pose banking risks. Allaire noted that holding significant cash reserves in bank accounts increases credit and counterparty risk. These concerns are shared by some officials at the European Banking Authority (EBA).

“Bank deposits involve credit and counterparty risk. EBA officials also recognize this,” said Patrick Hansen, Circle’s head of EU strategy and policy.

Another challenge is the difficulty of finding enough banking partners to maintain the necessary reserves. Aller emphasized that crypto companies often find it difficult to maintain ongoing partnerships with banks, which may create additional obstacles to complying with the new MiCA requirements.

Earlier this month, Circle added support for the Base network from crypto exchange Coinbase for the euro-pegged stablecoin EURC. Base is the second-largest Layer 2 (L2) network on the Ethereum blockchain, with a Total Value Locked (TVL) of $7.3 billion. Stablecoins account for 41% of that total, according to L2Beat.

The new MiCA law regulating stablecoin reserves is causing serious concerns among representatives of the crypto industry such as Jeremy Allaire. The main problems are related to banking risks and difficulties in finding banking partners to store reserves. Despite these challenges, Circle continues to develop its products and integrate with new networks such as Coinbase's Base, demonstrating its commitment to adapt to new conditions and continue to innovate in the cryptocurrency space.