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

Circle, the issuer of the USDC stablecoin, is pushing the European Union to modify its Markets in Crypto-Assets Regulation (MiCA) framework to better accommodate global stablecoin issuers. The company proposes creating a second pathway for foreign-regulated stablecoins to operate in Europe without needing full EU authorization. This would involve the European Commission assessing whether foreign regulations are equivalent to EU standards, followed by the European Banking Authority (EBA) recognizing individual issuers for distribution through locally licensed entities.

Circle also advocates for preserving multi-issuance structures, where EU-authorized entities co-issue stablecoins with foreign-regulated counterparts. The company argues that restricting this practice could drive European users toward offshore platforms, bypassing MiCA’s protections. Currently, only three of the top 25 stablecoins by market value, USDC, USDG, and EURC, are regulated under MiCA, despite around 30 e-money tokens securing authorization since the framework’s implementation.

Both Circle and Tether have raised concerns over MiCA’s requirement that stablecoin issuers keep at least 30% of reserves in commercial-bank deposits, increasing to 60% for significant tokens. Circle suggests replacing this with a broader liquidity standard, arguing that mandatory deposits heighten exposure to bank credit and counterparty risks. Tether’s CEO, Paolo Ardoino, previously warned that forcing large stablecoin issuers to place substantial reserves in banks could create systemic vulnerabilities if those institutions failed or couldn’t meet large withdrawals.

Circle also seeks the removal of 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 claims, can prevent dollar stablecoins from relying on high-quality sovereign securities and force large issuers to spread reserves across numerous banks. However, the EBA has urged the Commission to strengthen MiCA against risks from third-country multi-issuer stablecoin structures, cautioning that critical functions could fall outside effective EU supervision.