Circle and Tether Challenge EU Stablecoin Reserve Rules
Circle, the issuer of the USDC stablecoin, is advocating for changes to the European Union’s Markets in Crypto-Assets Regulation (MiCA). The company urges the EU to recognize foreign-regulated stablecoins and ease reserve requirements that it argues restrict global issuers. Circle proposes a recognition regime allowing overseas stablecoin companies to distribute tokens in Europe without full EU authorization, provided their home regulations meet EU standards. The European Banking Authority (EBA) would oversee this process, with issuers primarily supervised in their home countries but distributing tokens through locally licensed entities.
Circle also opposes MiCA’s requirement that stablecoin issuers keep at least 30% of reserves in commercial-bank deposits, rising to 60% for significant tokens. The company argues that this mandate increases exposure to bank credit and counterparty risks, preferring a broader liquidity standard instead. Tether’s CEO, Paolo Ardoino, has made similar criticisms, warning that forcing stablecoin issuers to hold substantial reserves in banks could create systemic vulnerabilities if those institutions fail.
In addition, 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. These restrictions, Circle argues, prevent stablecoins from relying on high-quality sovereign securities and force issuers to spread reserves across numerous banks. Despite these proposals, the EU is considering tighter controls on multi-issuer stablecoin structures, with the EBA urging the Commission to strengthen MiCA against risks arising from third-country issuers.
The European Commission’s MiCA review consultation closed on September 30, with findings potentially leading to legislative amendments. Circle’s proposal offers no immediate route into Europe, as foreign issuers remain subject to the existing framework while Brussels decides whether to open MiCA to more global liquidity.