Circle urges MiCA rethink on stablecoin reserves

TLDR

Circle is asking the EU to loosen MiCAs rigid bank-deposit rules for stablecoin reserves and move to a more flexible, liquidity-based regime.

1. Circle wants MiCAs requirement that 3060% of reserves sit in bank deposits replaced with liquidity requirements that focus on how quickly assets can be used for redemptions.
2. The company argues current rules can actually increase exposure to bank failures, citing the 2023 USDCSVB incident and aligning with similar concerns from European central banks.
3. Any change will come only after the European Commissions MiCA review, so users should watch whether the EU prioritizes stricter control of banks or more flexible, global stablecoin issuance.

Deep Dive

1. What Circle Wants Changed

Under MiCA, issuers of e?money tokens (including most fiat stablecoins) must keep at least 30% of reserves in commercial bank deposits, rising to 60% for significant issuers like top global stablecoins.

Circle, issuer of USD Coin (USDC) and EURC, is urging the European Commission to replace those fixed bank-deposit minimums with a liquidity-based requirement, so what matters is how quickly reserve assets can be converted to cash for redemptions, not that a preset slice must be sitting in banks. Multiple reports summarize Circles consultation response and proposed revisions to MiCAs reserve rules.

Circle also wants to scrap a 35% cap on exposure to a single sovereign and the cap on deposits at one bank (1.5% of that banks assets), saying these constraints complicate using short-term government debt as the core backing for large stablecoins.

2. Why Circle Sees Current Rules As Risky

Circle argues that forcing a large share of reserves into bank deposits increases credit and counterparty risk to the banking sector. It cites March 2023, when USDC briefly depegged after $3.3 billion of reserves were trapped at Silicon Valley Bank, before US authorities guaranteed deposits.

Its proposal instead echoes the European System of Central Banks, which has suggested minimum shares of reserves that mature within one and five business days. That keeps a focus on liquidity in stress scenarios while avoiding over-reliance on any given bank.

For users, the core promise of 1:1 redemption at par would remain under MiCA, but the risk profile behind that promise could shift depending on how much sits in banks versus Treasuries or similar assets.

3. Multi-Issuance And What To Watch Next

Circle also wants the EU to preserve multi-issuance, where an EU entity and a non-EU entity co-issue the same fungible stablecoin (for example, USDC issued in the US and by Circle France for the EEA). It warns that blocking this could push Europeans toward offshore stablecoins outside MiCA oversight, as noted in coverage of Circles MiCA review submission.

The Commissions consultation has closed; feedback will inform a MiCA report and any legislative amendments, likely around 2027. In parallel, Circle highlights that only a few of the top 25 stablecoins are currently MiCA-regulated, framing its proposals as tweaks to keep Europe competitive.

Conclusion

Circles push does not attack MiCA itself but targets how reserve rules are structured, arguing that rigid bank-deposit quotas can backfire on stability and competitiveness. The EUs response will determine whether MiCA becomes a framework that large global stablecoins can comfortably operate under, or whether liquidity migrates to offshore, less directly regulated alternatives.