Circle urges EU to ease stablecoin reserves

TLDR

Circle is asking the European Union to soften MiCA stablecoin rules, especially strict requirements to park large chunks of reserves as bank deposits.

1. Circle wants MiCA revised so foreign stablecoin issuers can be formally recognized without duplicative licensing and rigid bank deposit quotas.
2. It argues the current rule that 30 to 60 percent of reserves sit in commercial banks raises credit and counterparty risk instead of reducing it.
3. The consultation period has ended, and early signals suggest the EU may tweak stablecoin rules, which could reshape how USDC and other major tokens operate in Europe.

Deep Dive

1. What Circle Wants Changed

Circle, issuer of USDC and EURC, told the European Commission that MiCA currently regulates only three of the 25 largest stablecoins, two of which are its own. In its submission, it backs a multi issuance model where a MiCA licensed institution and a foreign issuer jointly support a global stablecoin, warning that scrapping this approach could push EU users onto offshore exchanges outside MiCAs reach.

Circle proposes a recognition regime where foreign issuers are supervised primarily in their home jurisdiction, subject to equivalence and sign off by the European Banking Authority, while EU licensed entities handle distribution in the bloc. That would also let euro based stablecoins circulate abroad under reciprocal arrangements.

2. Why Deposit Rules Are Controversial

MiCA currently requires e money token issuers to keep 30 percent of reserves in commercial bank deposits, rising to 60 percent for significant tokens. Circle argues this forces issuers to take more exposure to the banking system, concentrating credit and counterparty risk rather than diversifying reserves. It also notes the European Central Bank has already questioned whether these deposit floors are appropriate, and calls for a more flexible minimum liquidity requirement instead of hard bank quotas.

3. What Comes Next For Stablecoins

The European Commissions targeted consultation has closed, and reporting on Circles comments indicates Brussels is open to adjusting MiCA stablecoin rules in light of global developments, including new US legislation such as the GENIUS Act. That openness does not guarantee changes, but it signals the current framework is not frozen.

For crypto users in the EU, the outcome will affect which dollar and euro stablecoins can be offered on regulated venues, how their reserves are constructed, and whether offshore only tokens remain attractive despite tighter supervision of MiCA compliant options.

Conclusion

Circles push highlights a core tension in stablecoin regulation: protecting users without forcing issuers to take concentrated banking risk or driving activity offshore. If the EU relaxes strict bank deposit requirements while tightening recognition for foreign issuers, European stablecoin markets could end up both safer and more globally connected.