Circle and Tether Align Against MiCA’s Stablecoin Reserve Rules

Circle, the issuer of USDC, is pushing the European Union to modify 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 becoming fully authorized EU entities. Under this proposal, the European Commission would first assess whether a foreign jurisdiction’s regulatory standards align with EU rules. The European Banking Authority (EBA) would then recognize individual issuers, allowing them to operate under their home country’s supervision while distributing tokens through locally licensed institutions.

Circle argues that the current MiCA rules, which require e-money token issuers to obtain EU authorization for public distribution, are too restrictive. Only three of the world’s 25 largest stablecoins, 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 advocates for preserving multi-issuance structures, where a MiCA-authorized European entity co-issues a stablecoin with a foreign-regulated counterpart. Restricting this structure, Circle warns, could drive European users toward offshore platforms and tokens outside MiCA’s protections.

Circle is also challenging 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 argues for replacing this with a broader liquidity standard, citing increased exposure to bank credit and counterparty risk. This criticism aligns with previous statements by Tether CEO Paolo Ardoino, who warned that forcing large stablecoin issuers to place substantial reserves in banks could create systemic vulnerabilities. Ardoino stated that Tether declined to seek an EU license due to this requirement.

Additionally, Circle 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. The company argues that these restrictions prevent dollar stablecoins from relying on high-quality sovereign securities and force large issuers to spread reserves across numerous banks. Despite these proposals, the European Commission’s MiCA review consultation closed on September 30, and any legislative amendments remain uncertain. Foreign issuers will continue to be subject to the existing framework until Brussels decides whether to open MiCA to more global liquidity.