Stablecoin giants challenge EU MiCA reserve rules

TLDR

Circle and Tether are jointly pushing the EU to soften MiCAs strict reserve rules for large stablecoins, arguing they are poorly designed and could backfire.

1. Circle and Tether object to MiCAs requirement that significant stablecoins keep large slices of reserves in bank deposits and to limits on cross border multi issuer structures.
2. The issuers say these rules concentrate risk in commercial banks, restrict use of low risk government securities, and may keep major dollar stablecoins outside the MiCA perimeter.
3. The European Commissions ongoing MiCA review, plus guidance from ESMA and the EBA, will determine whether rules change or whether issuers must adapt, scale back, or exit parts of the EU market.

Deep Dive

1. What Rules The Issuers Are Challenging

Under MiCA, fiat referenced stablecoins designated as significant must hold at least 30 percent of reserves in commercial bank deposits, rising to 60 percent for some tokens, with tight caps on concentration in any one bank or sovereign bond issuer. Circle and Tether argue that this bank deposit mandate increases credit and counterparty risk by forcing them to spread reserves across many banks rather than relying more on short term government securities.

Circles consultation response also criticizes limits on multi issuance structures where an EU entity co issues a global stablecoin alongside a non EU affiliate, and instead proposes an equivalence regime in which well regulated foreign issuers could be recognized and supervised mainly at home. Tethers CEO Paolo Ardoino has raised similar concerns and has cited the bank deposit rule as a reason it did not seek an EU license under MiCA.

2. Why This Matters For Stablecoin Users In Europe

Circle notes that only a handful of the worlds largest stablecoins are currently MiCA regulated, despite roughly 30 euro area e money tokens being authorized overall, and warns that rigid reserve rules could keep the biggest dollar tokens outside the regime. It argues that restricting multi issuance and insisting on high bank deposit shares will push users toward offshore stablecoins and platforms that fall completely outside MiCA protections.

If rules do not change, Circle may have to keep separate European reserve pools with more restrictive redemption policies, while Tether may continue serving European users primarily via offshore venues, limiting onshore liquidity. Exchanges are already adapting: for example, OKX has created a USDT to USDC conversion path in Europe as MiCA rules tighten, and euro stablecoin initiatives such as EURC and EURP are gaining support from European firms.

3. What To Watch Next In The MiCA Review

The European Commission is reviewing MiCA based on consultation feedback, while ESMA and the European Banking Authority have both suggested tightening some aspects, especially around third country multi issuer structures and enforcement. The European Systemic Risk Board has recommended interpreting MiCA as not permitting certain cross border schemes unless extra safeguards are added, reflecting regulators concern that reserves and redemptions could escape effective EU supervision.

From here, key signals will be any Commission proposal to adjust the bank deposit percentages, concentration limits, or recognition of foreign issuers, and which major stablecoins ultimately gain MiCA authorization. For users and businesses, the practical questions are which tokens remain easily accessible on EU regulated venues, whether onshore liquidity concentrates in euro stablecoins, and whether dollar stablecoin access shifts to geofenced or offshore channels.

Conclusion

Circle and Tethers pushback shows that MiCAs detailed reserve rules and supervision model are not just legal fine print but central to whether major dollar stablecoins operate fully inside Europes regulatory perimeter. If regulators ease bank deposit and multi issuer constraints, they could attract more global liquidity into MiCA, whereas a hard line may fragment the market, pushing some flows to offshore venues while boosting onshore euro stablecoins.