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Circle Urges EU to Ease Crypto Thresholds in Proposed Markets Framework

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Circle is pushing back on Europe. The stablecoin issuer has formally petitioned the European Commission to lower the capitalization thresholds in its proposed Market Integration Package. The argument is direct: the current rules create a regulatory paradox where a stablecoin must already be massive before it is legally permitted to operate at an institutional scale.

For euro-denominated stablecoins like EURC, the framework creates friction. It effectively bans them from institutional settlement before they ever get the chance to grow.

Key Takeaways: Circle’s Feedback on MIP
  • The Ask: Lower the market cap threshold for e-money tokens (EMTs) to qualify as collateral under the Central Securities Depositories Regulation.
  • The Framework: The EU’s Market Integration Package, designed to unify capital markets and expand the DLT Pilot Regime.
  • Market Impact: Removing these barriers would allow EURC and other euro stablecoins to function as liquidity layers in formal securities settlement.

The Mechanics of the ‘Chicken-and-Egg’ Problem

The complaint comes down to one mechanical flaw.

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Under the current draft of the Central Securities Depositories Regulation, only e-money tokens that already meet a high market capitalization threshold can be used in settlement systems. Circle’s problem with that is straightforward. No euro-denominated EMT currently meets that threshold.

The regulation creates a chicken-and-egg scenario. Tokens need a settlement utility to grow. Settlement utility requires a scale that they cannot achieve without it. Circle is calling it a structural barrier to entry and they are right.

The firm is requesting amendments to the DLT Pilot Regime to break the cycle. Excluding non-significant EMTs from settlement does not protect the market. It stalls the EU’s entire tokenization ambition before it starts.

The stakes are direct. If the European Commission adopts Circle’s recommendation, EURC moves from a niche trading pair to a recognized settlement instrument for traditional finance. Banks and asset managers can settle trades on-chain. Euro stablecoins become functional collateral under CSDR rules.

If nothing changes, institutional participation stays theoretical. The vast majority of stablecoin liquidity sits in USD-denominated assets like USDC. For the EU to build a functioning DLT-based economy it needs a euro equivalent that moves frictionlessly between crypto exchanges and regulated securities venues.

The current framework does the opposite. It locks euro stablecoins out of the infrastructure they need to scale. Circle’s March 20 submission is an attempt to preempt a liquidity freeze in a market that has not even launched yet.

Regulatory Context: MiCA and the Integration Gap

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Circle’s lobbying effort comes just months after the Markets in Crypto-Assets (MiCA) regulation took full effect in December 2024. While MiCA provided the licensing framework for issuers, the Market Integration Package is intended to build the rails for those assets to move across borders.

The friction underscores a broader disconnect. While MiCA is law, its implementation has been criticized by legal experts for varying wildly from country to country. Yuriy Brisov, a partner at Digital & Analogue Partners, has argued that the rules remain difficult to interpret, leaving issuers in a gray zone regarding compliance.

The Commission’s proposals are intended to fix this fragmentation, but Circle warns that without specific tweaks to the DLT regime, the “integration” will be in name only. As negotiations on the package continue—potentially through 2027—the gap between regulatory intent and market reality is widening.

If the Commission adjusts the thresholds, Europe opens the door to on-chain capital markets. If they hold the line, euro stablecoins remain stuck in the sandbox. Until the final text is agreed upon, institutional adoption is waiting on a definition.

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The post Circle Urges EU to Ease Crypto Thresholds in Proposed Markets Framework appeared first on Cryptonews.

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Crypto World

Wall Street Will Eventually Submit To The Rules Of DeFi

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Wall Street Will Eventually Submit To The Rules Of DeFi

Opinion by: Mitchell Amador, founder and CEO of Immunefi

There’s an argument that regulation will split decentralized finance (DeFi) into two separate silos: one regulated and compliant and the other completely open and accessible by anyone, including anonymous participants.

This argument is outdated.

Regulatory pressure in 2026 will reshape DeFi into a network of interoperable, interlinked ecosystems with distinct risk, compliance and access profiles.

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Some tiers will become more compliant and institution-friendly, while others will remain open, permissionless and driven by onchain leverage and market experimentation.

This evolution won’t drag DeFi toward TradFi. Rather, it will bring TradFi into DeFi’s orbit.

DeFi already operates in multiple lanes

DeFi has never functioned as a single monolith; it operates across several concurrent compliance tiers.

The first lane is permissionless DeFi, where anyone can deploy a contract, supply liquidity and use leverage. This is the engine of innovation, where price discovery and stress testing happen in public, as does failure. Permissionless pools have no Know Your Customer (KYC), allow pseudonymous users and exist because global markets can move faster than regulated institutions.

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The next tier consists of protocols with built-in safeguards, like liquidation rules, governance frameworks and oracle protections, but no identity requirements. These serve people who want liquidity and yield with risk management.

Finally, there is the newer, heavily controlled lane, where KYC checks, geofencing and compliance filters are applied at the access-point level.

The same underlying smart contracts can still be reached, just through different gates.

Liquidity trumps isolation

Full isolation of compliant DeFi is unlikely. Capital seeks liquidity, and liquidity seeks composability. That means the regulated lanes will run through permissionless infrastructure.

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Institutions entering digital assets will want access to the scale of liquidity that only onchain markets can provide — 24/7 global access, near-instant settlement and depth that traditional venues cannot match. The passage of the GENIUS Act, which bans yield-bearing stablecoins, has already pushed institutional capital toward DeFi protocols in search of returns.

If the liquidity accessed is compelling enough, institutions will tolerate complexity and innovation risks. Regulation won’t eliminate this incentive.

Security innovation starts in the arena

Institutional and compliant participants care deeply about security, yet the center of gravity for security innovation will sit inside permissionless DeFi.

That may sound counterintuitive, given that over $3.1 billion was lost to hacks and exploits during the first half of 2025 alone.

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Related: For Wall Street’s most sophisticated trading firms, the next alpha is onchain

Adversarial conditions are precisely where robust defenses are forged. Bug bounty programs, real-time monitoring tools and AI-driven threat detection were all born in the permissionless environment and stress-tested against live exploits before any compliance framework adopted them.

This pattern will accelerate. New security models that range from automated vulnerability scanning to onchain firewalling will continue to emerge in open DeFi and will then be standardized and adopted by the institutional side once they prove effective.

Regulation will cement DeFi’s central role

Regulation will certainly not fracture DeFi. What we will see instead is how decentralized finance will cement its position at the center of global finance.

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The future, to be sure, is not compliant DeFi versus permissionless DeFi, because DeFi has the ability to be interoperable. It’s a network where open markets generate liquidity and innovation, and regulated players selectively plug in. That’s why we will see regulatory pressures mold the ecosystem into interconnected tiers, with some gravitating toward greater compliance and others toward the open marketplace, all of them linked by the composability that makes onchain finance uniquely powerful.

That dynamic will inevitably draw TradFi closer to DeFi as institutions seek out the far greater liquidity, speed and efficiency of decentralized markets.

Opinion by: Mitchell Amador, founder and CEO of Immunefi.