Circle Internet (CRCL) Urges EU Regulators to Revise Restrictive Crypto Settlement Rules

Key Takeaways

• On March 20, Circle delivered formal comments to the European Commission regarding its Market Integration Package proposal
• The company advocates for reduced market capitalization requirements for e-money tokens (EMTs) in settlement processes
• Currently, no euro-backed EMT—EURC included—satisfies the existing market cap criteria
• Circle proposes implementing flexible thresholds that respond to market dynamics instead of rigid limits
• The stablecoin issuer wants crypto-asset service providers granted access to DLT Pilot Regime cash accounts alongside traditional banks

Circle has voiced concerns to European policymakers that proposed cryptocurrency settlement regulations are overly stringent and risk undermining institutional engagement with tokenized financial markets.

Circle Internet Group, CRCL

The digital currency company delivered its formal feedback on March 20 regarding the European Commission’s Market Integration Package—an expansive regulatory framework aimed at bolstering capital market integration throughout the European Union.

Circle acknowledged the MIP as a “meaningful step toward a digitally enabled financial system” while emphasizing that multiple provisions require refinement to ensure practical effectiveness.

The primary concern centers on e-money tokens and their eligibility for securities settlement operations. According to current proposals, only EMTs designated as “significant” would qualify for cash-leg settlement—a status determined by market capitalization benchmarks.

Circle pointed out that no euro-denominated EMT, including its EURC stablecoin, approaches the required threshold at present. EURC currently trades at $1.16.

The Growth Paradox

Circle characterized this situation as creating an institutional obstacle. When tokens cannot participate in settlement mechanisms until achieving specific market size, yet cannot expand sufficiently without settlement access, the regulatory framework produces a self-limiting cycle.

“Restricting settlement to ‘significant’ EMTs risks excluding euro-denominated EMTs,” Circle stated, noting that these thresholds represent a “structural barrier to institutional participation and secondary market liquidity.”

As a remedy, Circle recommends the Commission implement “adaptive” thresholds—criteria that adjust according to practical considerations such as market adoption rates and liquidity metrics—rather than inflexible caps requiring comprehensive legislative revisions.

The organization also highlighted regulatory timing as problematic. It encouraged authorities to accelerate reforms independently of the wider legislative schedule, reinforcing concerns expressed by tokenization companies last month that prolonged delays might redirect business activity toward the United States, where blockchain-based market infrastructure is advancing more rapidly.

DLT Pilot Framework and Collateral Guidelines

Beyond settlement criteria, Circle criticized limitations within the DLT Pilot Regime’s current design. Under existing proposals, cash accounts within this regime remain restricted to credit institutions and central securities depositories.

Circle advocates broadening eligibility to encompass crypto-asset service providers, contending the present arrangement introduces unwarranted operational challenges.

The company additionally requested more explicit guidance on utilizing stablecoins as collateral, referencing parallel initiatives underway in both the United States and United Kingdom.

Regarding supervisory structure, Circle recommended constraining centralized EU-level oversight. It proposed that ESMA concentrate on substantial, multinational operators, while smaller entities remain under domestic regulatory authority.

The cornerstone of European Union cryptocurrency legislation continues to be the Markets in Crypto-Assets Regulation (MiCA), which became operational in December 2024. MiCA has faced scrutiny from certain legal professionals who characterize it as challenging to interpret and inconsistently implemented across member nations.

Circle’s EURC represents a MiCA-compliant euro-backed stablecoin. Its primary offering remains USDC, presently valued at $1.

Circle described the MIP as a “pivotal moment” for the European Union to bridge conventional finance with blockchain technology, asserting that more transparent and proportionate regulation would enhance operational efficiency and market liquidity throughout the region.