USD Coin (USDC) issuer Circle is urging the European Union to reform its Markets in Crypto-Assets Regulation (MiCA) framework by relaxing bank reserve rules and permitting foreign-regulated stablecoins into the European market.
Proposed Recognition Regime for Foreign Issuers
Circle proposed an equivalence recognition model where the European Commission evaluates whether a foreign jurisdiction's regulatory regime meets EU standards. Following equivalence determinations, the European Banking Authority (EBA) would recognize individual foreign issuers while leaving primary supervision to home country regulators. Currently, only 3 of the world's 25 largest stablecoins by market value—USDC, USDG, and EURC—are regulated under MiCA, despite roughly 30 e-money tokens obtaining authorization since the rules took effect.
Circle also called on EU officials to safeguard multi-issuance models, where a MiCA-authorized European firm co-issues a globally circulating token alongside a foreign counterpart. The firm warned that restricting cross-border issuing structures risks driving European users toward offshore platforms and unmonitored digital assets.
Opposition to MiCA Reserve Limits
Circle is challenging MiCA requirements that force e-money token issuers to keep at least 30% of reserves in commercial bank deposits, a threshold that jumps to 60% for tokens designated as "significant." The issuer argued these mandatory deposit levels heighten exposure to bank credit and counterparty risks, advocating instead for a broader liquidity standard.
This argument directly mirrors prior warnings from Tether Chief Executive Officer Paolo Ardoino, who previously stated that Tether declined to seek an EU license because concentrating massive reserves in commercial banks creates systemic risk if those institutions fail. Despite Circle choosing to comply with MiCA while Tether kept USDT outside the framework, both competitors now agree that forced bank deposit concentration threatens liquidity stability.
Additionally, Circle requested the removal of a 35% cap on single-sovereign debt exposure and the 1.5% limit on deposits placed with any individual commercial bank. These liquidity limits complicate broader regulatory changes seen across global finance, similar to how SEC Treasury Clearing Rules alter stablecoin liquidity and reserve management strategies.
- Key Takeaways:
- Circle proposed an equivalence framework for foreign-regulated stablecoin issuers in the EU.
- Only 3 of the top 25 global stablecoins (USDC, USDG, EURC) currently operate under MiCA.
- Circle and Tether both oppose mandatory 30% to 60% bank deposit reserve requirements.
- The EBA warned against third-country multi-issuer risks prior to the consultation's Sept. 30 deadline.
Why It Matters
The rare consensus between major rivals Circle and Tether highlights growing industry concern that MiCA reserve mandates could destabilize stablecoin issuers rather than protect consumers. By forcing firms to place up to 60% of cash reserves into commercial banks, EU rules expose digital asset backers to traditional banking counterparty risks and credit shocks. As the European Commission evaluates feedback following the close of its Sept. 30 consultation, its decisions on foreign equivalence and reserve flexibility will determine whether Europe stays connected to global stablecoin liquidity.
