Circle Urges EU to Strengthen Digital Asset Rules Under Market Integration Package

TLDR:

• Circle recommends adaptive DLT thresholds based on market uptake, liquidity conditions, and supervisory assessments.
• No euro-denominated EMTs currently meet the significance threshold, creating a structural barrier to their growth.
• Circle urges ESMA supervision to focus only on large, cross-border crypto firms that present genuine systemic risk.
• Circle calls for legislative updates to formally recognize EMTs as eligible collateral under EU financial frameworks.

Circle has formally responded to the European Commission’s Market Integration Package, offering detailed recommendations on how the EU can better integrate digital assets into its capital markets framework.

The company submitted its feedback on March 20, 2026, covering four key reform areas. These include the DLT Pilot Regime, e-money token settlement, centralized supervision, and collateral frameworks.

Circle Calls for Reforms to DLT Pilot Regime and EMT Settlement Rules

The Market Integration Package proposes expanding the DLT Pilot Regime, and Circle supports this direction. However, the company believes the current volume thresholds still limit institutional participation.

Circle recommends adopting adaptive thresholds based on market uptake, liquidity conditions, and supervisory assessments. This approach would provide clearer guidance for market participants while keeping oversight intact.

Circle also stresses the need for a defined path from the pilot phase to permanent legislation. Without that clarity, long-term infrastructure investment remains difficult to justify.

The proposal currently requires ESMA to report on the pilot by 2030, but the steps after that report remain undefined. Circle recommends advancing DLT Pilot Regime updates on a standalone basis to avoid delays.

On e-money tokens, Circle welcomes the Commission’s recognition of MiCA-compliant EMTs for cash-leg settlement in securities transactions. The company warns, however, against restricting settlement to only “significant” EMTs.

As Circle noted in its feedback, “restricting settlement via CSDs to ‘significant’ EMTs risks excluding euro-denominated EMTs, and creating a chicken-and-egg scenario that stifles their growth.” No euro-denominated EMTs currently meet the significance threshold, making this a structural concern.

Circle also recommends aligning the CSD Regulation with the DLT Pilot Regime on EMT cash accounts. Currently, cash accounts are restricted to credit institutions and CSDs.

The company proposes extending this access to authorized Crypto-Asset Service Providers, consistent with existing EBA guidance.

Supervision Reforms and Collateral Frameworks Need Careful Calibration

Regarding centralized supervision, Circle supports a targeted approach but urges caution. Moving oversight of Crypto-Asset Service Providers to ESMA should focus on firms that present genuine systemic risk.

As Circle stated, “national competent authorities are often better positioned to provide agile oversight for non-systemic firms.” Reopening the core supervisory model for MiCA could create prolonged regulatory uncertainty.

Circle also notes that EU firms already face oversight from multiple bodies under different regimes. Adding more complexity risks slowing down the EU’s growth and efficiency goals. A measured transition, focused on systemic actors only, would reduce administrative friction across the board.

On collateral frameworks, Circle urges legislative updates to formally recognize EMTs as eligible collateral. Updates to the European Market Infrastructure Regulation would reduce adoption barriers.

Circle pointed out that “international peers, including the U.S. CFTC and the UK’s Bank of England, are exploring the integration of tokenised instruments into their collateral and margin frameworks.” This positions the EU at risk of falling behind if reforms are not advanced promptly.

Circle provides USDC and EURC as regulated infrastructure for European financial services. The company sees the Market Integration Package as a defining moment for EU capital markets development.

In its closing remarks, Circle described the package as “a pivotal moment for the EU’s vision of a deep and integrated capital markets union.”

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