Circle and Tether align against MiCA’s stablecoin bank reserve rules

Circle, the issuer of the USDC stablecoin, is pushing the European Union to adjust its Markets in Crypto-Assets Regulation (MiCA) framework to better accommodate foreign-regulated stablecoins. The company proposes a recognition regime that would allow qualifying overseas stablecoin issuers to distribute tokens in Europe without full EU authorization. This system would involve the European Commission assessing foreign regulatory regimes for equivalence and the European Banking Authority recognizing individual issuers, who would remain supervised in their home countries while operating through locally licensed entities.

Circle argues that only three of the world’s 25 largest stablecoins by market value, USDC, USDG, and EURC, are currently regulated under MiCA, despite roughly 30 e-money tokens securing authorization since the framework took effect. The company also wants to preserve multi-issuance structures, where a MiCA-authorized European entity co-issues a globally circulating stablecoin with a foreign-regulated counterpart. Circle warns that restricting this structure could push European users toward offshore platforms and tokens outside MiCA’s protections.

In addition, Circle challenges MiCA’s requirement that e-money token issuers keep at least 30% of reserves in commercial-bank deposits, rising to 60% for significant tokens. The company advocates for a broader liquidity standard, arguing that mandatory deposits increase issuers’ exposure to bank credit and counterparty risk. This argument aligns with criticism from Tether CEO Paolo Ardoino, who warned that forcing large stablecoin issuers to place substantial reserves in banks could create systemic vulnerabilities. Tether declined to seek an EU license due to the same requirement.

Circle also wants the EU to remove a 35% cap on exposure to a single sovereign and a rule limiting deposits with an individual bank to 1.5% of that lender’s total assets. However, regulators are considering tighter controls, with the European Banking Authority urging the Commission to strengthen MiCA against risks arising from third-country multi-issuer stablecoin structures. The Commission’s MiCA review consultation closed on September 30, and its findings could lead to legislative amendments, meaning Circle’s proposal offers no immediate route into Europe.