Circle Seeks EU Stablecoin Rule Changes to Boost Liquidity and Flexibility

Circle, the issuer of the USDC stablecoin, has submitted a proposal to the European Commission to change the rules for bank deposits of e-money tokens. Under the current MiCA regulations, issuers are required to hold at least 30% of their reserve assets in commercial bank deposits, with a minimum of 60% for significant e-money tokens. Circle argues that these limits concentrate reserves in the banking system and are too rigid, proposing instead a liquidity rule that would give issuers more flexibility.

The company also wants to remove the EBA Level 2 cap limiting a reserve's exposure to a single sovereign issuer to 35%. This, it argues, would make it impossible for issuers of non-euro tokens to hold primarily high-quality liquid sovereign assets. Additionally, Circle is seeking to eliminate a separate limit of 1.5% of a bank's total assets for each banking counterparty, which it claims would increase operational complexity and risk for larger issuers.

Circle's submission does not provide detailed figures on how much USDC would hold under the proposed rules, nor does it clarify the treatment of other widely used tokens, such as USDT. The proposal also leaves the redemption terms for USDC, EURC, and USDT unclear. However, Circle is seeking to preserve multi-issuance as an available structure, which would allow reserves to be split between global and EU-specific pools with dynamic rebalancing.

The company is also proposing a broader recognition system for stablecoins issued outside the EU, where foreign issuers would remain supervised in their home jurisdiction and subject to Commission-level regime equivalence and recognition by the European Banking Authority. This, it argues, would provide a route for foreign-regulated stablecoins to remain available in Europe and could work in reverse for EU-issued stablecoins through reciprocal recognition.