Circle asks EU to drop MiCA bank-deposit rule for stablecoins
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Circle has asked the European Commission to rewrite the reserve rules at the centre of the EU’s Markets in Crypto-Assets Regulation, telling Brussels that a fixed bank-deposit mandate leaves stablecoin issuers more exposed to the banking system, not less. The USDC issuer submitted its response to the Commission’s MiCA consultation on Thursday, October 2, according to Decrypt.
The company framed its submission as a refinement of a framework it credits with giving Europe an early lead on digital-asset rules, rather than a rejection of it. Its core complaint is one of coverage: of the top 25 stablecoins by market value, Circle said only three are MiCA-regulated. The rules, in its telling, have produced a deep bench of authorised issuers — just not the tokens that dominate global circulation.
Why Circle says bank deposits add risk
Under MiCA, regular e-money token issuers must keep at least 30% of reserves in commercial bank deposits; that floor climbs to 60% for stablecoins the EU deems significant. Circle argues the requirement does the opposite of what it appears to do — concentrating issuer exposure to the credit and counterparty risk of the banking sector rather than insulating the token.
The company’s own history is the reference point. USDC temporarily lost its dollar peg in March 2023 after Circle disclosed that $3.3 billion of its reserves sat at Silicon Valley Bank when the lender failed. US authorities later protected the bank’s depositors and the funds became available to Circle. Against that backdrop, Circle wants regulators to focus on how quickly reserve assets can be accessed for redemptions instead of fixing a percentage that must sit with banks.
That position puts Circle alongside the European Central Bank and the EU’s 27 national central banks, which proposed a comparable model in September: minimum proportions of reserve assets maturing within one working day and five working days. The European System of Central Banks said the shift would let regulators judge redemption access without a fixed deposit share, and separately flagged that large stablecoin deposits can create risks for banks because issuer funds may behave differently from ordinary retail deposits. During heavy redemptions, an issuer could be forced to withdraw large sums from its banking partners in a short window — stress that could pass back into the lenders holding the reserves.
Two further reserve restrictions are in Circle’s sights. One places a 35% ceiling on exposure to a single sovereign, which Circle says limits the supply of government-backed liquid assets available to issuers of dollar-denominated tokens. The other caps deposits with an individual banking counterparty at an amount equal to 1.5% of that bank’s total assets — a rule Circle contends would push large issuers into relationships with dozens of banks to stay compliant.
Decrypt reported Circle also asked the EU to preserve multi-issuance, the structure allowing a globally circulating stablecoin to be co-issued by an EU-authorised entity alongside its foreign-regulated counterpart. Restricting it, the company argued, would move activity offshore. It separately proposed a recognition system for issuers regulated outside the EU, combining a European Commission assessment of a foreign jurisdiction’s framework with a European Banking Authority decision on recognising an individual issuer.
The MiCA authorisation divide
Reserve rules have already split the stablecoin market in Europe. Tether has declined to seek authorisation for USDT under MiCA, with CEO Paolo Ardoino previously arguing the deposit requirements could expose stablecoin reserves to commercial bank failures. After MiCA’s transition period ended, OKX opened a route in July letting eligible European users deposit USDT and convert it into MiCA-compliant USDC as restrictions on non-compliant stablecoins took effect.
Circle’s own European footing is built on a French Electronic Money Institution licence granted in July 2024, which lets its French entity issue USDC and EURC for European customers. EURC has since grown inside the regulated market, and data published in July showed the combined market capitalisation of eight MiCA-compliant euro stablecoins climbing 128% in the year through 28 June — from $295.6 million to $673.9 million — with EURC, EURCV and EURI accounting for most of the growth. Circle said EURC is being used across payments, foreign exchange, treasury operations and institutional settlement.
What other respondents asked for
Circle was not alone in using the consultation to seek changes beyond reserves. The Hyperliquid Policy Center asked regulators to treat crypto perpetual futures under the EU’s existing securities and derivatives framework, MiFID II, arguing they should be regulated by economic characteristics even when trading and settlement happen on blockchain infrastructure. It also asked regulators to recognise information available on public blockchains for transparency and recordkeeping purposes.
The Global Blockchain Business Council sought clearer rules on token classification and risk-proportionate safeguards for stablecoins, less overlap between MiCA and payment services rules, and — for tokens issued across jurisdictions — clear responsibility over redemptions, enforceable mechanisms for moving reserves between issuing entities and an EU supervisory structure with an identifiable accountable entity.
Why it matters
The consultation is the EU’s chance to decide whether MiCA captures the stablecoin market or merely regulates its edges. If Brussels keeps the deposit mandate and tightens multi-issuance, the largest dollar-denominated tokens have little incentive to bring their European activity inside the perimeter, and EU users keep getting access through conversion routes rather than directly regulated issuance. If it adopts the central banks’ liquidity-based model, reserve quality becomes a question of speed of redemption access rather than a fixed deposit share — a shift that would matter most for issuers holding tens of billions in Treasuries and cash.
The stakes extend beyond Europe. The submission lands as US issuers expand abroad and Washington increasingly frames dollar-pegged tokens as a tool to extend the greenback’s global reach, making the EU’s rulebook a live front in the contest over which jurisdiction’s stablecoins travel furthest.
What to watch
Brussels is expected to revise the framework in 2027, with foreign stablecoin issuers a stated focus of that overhaul. Before then, the Commission’s readout of the consultation — and whether it follows the ECB’s liquidity proposal rather than the deposit thresholds — will show how much of Circle’s argument it accepts. European crypto firms are meanwhile still working through MiCA’s transition period, and regulators continue to press platforms including Binance over compliance.
Frequently Asked Questions
What reserve rule is Circle trying to change under MiCA?
Circle wants the European Commission to replace the fixed bank-deposit mandate — 30% of reserves for e-money token issuers, 60% for those deemed significant — with minimum liquidity requirements based on how quickly reserve assets can be accessed for redemptions.
Why does Circle say bank deposits increase risk?
Circle argues the mandate concentrates exposure to banking-sector credit and counterparty risk, pointing to March 2023, when $3.3 billion of its USDC reserves were held at Silicon Valley Bank at the time of its failure and the token briefly lost its dollar peg.
What is multi-issuance and why does Circle want it kept?
Multi-issuance lets an EU-authorised entity and a regulated entity outside the bloc jointly issue the same stablecoin. Circle says removing it would push European users toward offshore providers outside MiCA’s protections, and its proposal includes mechanisms for rebalancing reserves between European and overseas issuers.
Do European regulators agree with Circle on reserves?
Partly. The European Central Bank and the EU’s 27 national central banks proposed a similar liquidity-based approach in September, asking regulators to set minimum proportions of reserve assets maturing within one and five working days.
How many of the largest stablecoins are MiCA-regulated?
Circle said only three of the top 25 stablecoins by market value are MiCA-regulated, its central argument for reworking the framework.
Sources: Decrypt, crypto.news
