Circle and Tether Rally Against EU Stablecoin Reserve Rules

Circle, a leading stablecoin issuer, is pushing back against the European Union's Markets in Crypto-Assets Regulation (MiCA), arguing that its bank reserve rules could expose stablecoins to banking risks. The company, which issued the USDC stablecoin, wants regulators to preserve multi-issuance, where a MiCA-authorized European entity co-issues a globally circulating stablecoin with a foreign-regulated counterpart.

Circle is also challenging the requirement that e-money token issuers keep at least 30% of reserves in commercial-bank deposits, rising to 60% for tokens classified as significant. It wants this requirement replaced with a broader liquidity standard, arguing that mandatory deposits increase issuers' exposure to bank credit and counterparty risk.

The move is notable because Circle chose to comply with MiCA while Tether, another leading stablecoin issuer, kept USDT outside the framework. Both companies now argue that requiring stablecoin issuers to concentrate liquidity in commercial banks can introduce risks regulators are seeking to contain.