Circle is calling on the European Union to amend its Markets in Crypto-Assets Regulation (MiCA) to accommodate foreign-regulated stablecoins and relax reserve mandates that limit global issuers.
The issuer of USDC has suggested introducing a recognition pathway that would permit qualified overseas stablecoin operators to offer tokens within Europe without securing full authorization as EU issuers. This initiative forms part of a wider effort to draw more of the worldwide market under the bloc’s regulatory oversight.
Circle noted that out of the 25 largest stablecoins globally by market capitalization, only three—USDC, USDG, and EURC—currently comply with MiCA, even though approximately 30 e-money tokens have achieved authorization since the regulations went into effect.
Under Circle’s framework, the European Commission would initially evaluate whether a foreign nation’s regulatory framework matches EU benchmarks. Following that, the European Banking Authority (EBA) would accredit specific issuers, allowing them to remain primarily overseen by their domestic regulators while distributing tokens via entities licensed locally.
This mechanism would present a substitute for existing MiCA mandates, which typically mandate that e-money token creators secure EU licensing before offering public distribution or trading within the region.
Additionally, Circle advocates for maintaining multi-issuance arrangements, wherein a European organization authorized under MiCA co-issues a globally traded stablecoin alongside an overseas-regulated partner. The firm cautioned that banning this approach could drive European consumers toward offshore exchanges and unregulated tokens.
MiCA stablecoin bank reserve rule draws wider opposition
Circle is likewise pushing back against the mandate compelling e-money token creators to store a minimum of 30% of their reserves in commercial bank deposits, a figure that increases to 60% for tokens deemed significant. The company proposes substituting this with a flexible liquidity guideline, contending that compulsory deposits heighten issuers’ vulnerability to bank credit and counterparty hazards.
This perspective mirrors prior statements from Tether CEO Paolo Ardoino, who cautioned that compelling major stablecoin providers to hold large cash reserves in banks could generate systemic risks if those financial institutions collapsed or failed to handle massive redemption requests. Ardoino stated last month that Tether opted against pursuing an EU license because of this exact regulation.
This shared stance is significant given that Circle adopted MiCA compliance while Tether left USDT outside the regulatory perimeter. Both entities now contend that forcing stablecoin providers to concentrate their liquidity within commercial banks may actually foster the very hazards regulators intend to prevent.
Furthermore, Circle requests that the EU eliminate the 35% limitation on holdings tied to a single sovereign nation, alongside the restriction capping deposits at an individual bank to 1.5% of that institution’s aggregate assets. The firm explained that these limits hinder dollar-backed stablecoins from depending adequately on premium sovereign bonds and compel major issuers to fragment their reserves across numerous banking partners.
Nonetheless, financial authorities are evaluating stricter measures in other areas. Last month, the EBA advised the Commission to bolster MiCA against vulnerabilities stemming from multi-issuer stablecoin setups based in third countries, cautioning that asset backing, redemption processes, and other essential operations can remain outside robust EU oversight.
The consultation period for the Commission’s MiCA evaluation concluded on September 30, and the resulting insights might prompt legislative updates. Consequently, Circle’s recognition framework does not provide an immediate pathway into Europe; overseas providers remain bound by current regulations while Brussels weighs whether welcoming broader international liquidity justifies dismantling certain safeguards that initially excluded them.