DL News reported that Jeremy Allaire, CEO of stablecoin issuer Circle, said at a previous press conference that the EU’s new Crypto Asset Market Act (MiCA) introduced banks’ credit and counterparty risks. In addition, the requirements for capital reserves are even more difficult for crypto companies.

MiCA introduces banking risks

Jeremy Allaire points out that the EU's MiCA regulations introduce banking risks and that provisions dealing with reserves are equally concerning.

Circle EU Strategy and Policy Chief Patrick Hansen then revealed:

MiCA introduces credit and counterparty risk, something that even regulators such as the European Banking Authority (EBA) have acknowledged.

Specifically, Counterparty Risk is a common risk in the financial industry. The main source is potential default or insolvency risk. The reasons may include poor financial management, economic recession, poor management, etc. Counterparty risk must be regularly monitored. financial and credit status, and take measures such as reducing exposure or renegotiating terms after risk warnings appear.

Allaire said that MiCA requires companies that issue stablecoins linked to fiat currencies to keep 30% of their reserves in cash in multiple EU bank accounts, and 60% for other digital currencies:

MiCA's reserve requirements will be reviewed in the middle of next year, with eventual full compliance with the MiCA review in two to three years' time.

Hansen later also mentioned the introduction of potential "MiCA II" regulations:

Some experts speculate that the "MiCA II" regulations may be introduced in the future to supervise current decentralized financial applications and update the old MiCA regulations.

Are there any banks willing to cooperate with crypto companies?

In addition, after facing the crypto banking crisis that broke out last year, Allaire admitted that it is difficult for crypto companies to find banking partners:

It is indeed very difficult for companies in our industry to establish stable banking relationships, especially as many banks in Europe often have many prohibitions on working with crypto companies.

(Swiss crypto bank FlowBank was declared bankrupt by the local monetary authority. Is cryptocurrency in trouble?)

However, he also said that Circle relies on several undisclosed major global banks to provide support for USDC in every major region.

Allaire stressed that there are advantages to providing crypto services through banks under the MiCA framework, and he has also seen interest from local banks in some businesses:

European banks themselves are very interested in issuing stablecoins and developing innovative payment pipelines, and they hope to enter this industry in a more comprehensive way.

Circle's regulatory lead

As the first MiCA-compliant stablecoin issuer by landing in France, Circle will also legally split its USDC issuance and redemption in jurisdictions on both sides of the Atlantic to ensure compliance:

USDC is now issued in two major jurisdictions, each with two different sets of audits, regulations and requirements.

(Circle becomes the first MiCA-compliant stablecoin merchant, will Tether’s leading position be shaken?)

Last month, Tether, another USDT that monopolizes the current stablecoin market, also expressed concerns about the implementation of MiCA:

These requirements not only make the work of stablecoin issuers more complicated, but also make EU-licensed stablecoins more fragile and have greater operational risks.

(MiCA will be launched at the end of the month, and Tether CEO is worried about the operational risks of stable currency)

At the same time, Binance also admitted that there are currently very few regulated stablecoins and the liquidity is quite limited, which may not be enough to support the needs of the entire industry:

However, it can be expected that more regulated stablecoins will appear on the market, causing the market to completely shift to regulated stablecoins over time to ensure that the goals of MiCA can be achieved.

This article Circle CEO is worried about MiCA: Introducing credit risk, no bank is willing to cooperate with reserves. First appeared on Chain News ABMedia.