Circle has formally responded to the European Commission’s consultation on reviewing the Markets in Crypto-Assets Regulation (MiCA), urging significant changes to how stablecoin reserves are managed. The issuer of USDC and EURC argues that while MiCA established a regulatory perimeter, it failed to capture the largest global tokens, noting that only three of the top 25 stablecoins by market value are currently MiCA-regulated. To address this, Circle recommended preserving "multi-issuance" structures, which allow globally circulating tokens to be co-issued by EU-authorized entities alongside foreign counterparts, warning that restrictions would push activity offshore.
The company’s most critical requests concern reserve composition. Current MiCA rules require e-money token issuers to hold at least 30% of reserves in commercial bank deposits, rising to 60% for tokens deemed "significant." Circle contended that this mandate increases exposure to banking-sector credit risk and aligned with the European Central Bank in calling for its replacement with flexible liquidity requirements. Additionally, Circle asked regulators to remove the 35% cap on single-sovereign exposure and limits on holdings at any one bank, stating these constraints force large issuers to spread reserves across dozens of institutions. This submission precedes a broader MiCA overhaul expected in 2027, occurring amidst a wider U.S.-EU contest over stablecoin dominance.
Circle’s intervention highlights a structural tension within MiCA: the framework prioritizes strict banking-sector integration through deposit mandates, yet this approach may inadvertently elevate systemic risk rather than mitigate it. By siding with the ECB against the 30%-to-60% bank-deposit requirement, Circle underscores a sophisticated regulatory argument that rigid asset allocation rules can create concentrated counterparty exposures. If the European Commission adopts these recommendations, it signals a shift from treating stablecoins purely as quasi-banking products to recognizing them as distinct financial instruments requiring specialized liquidity management protocols. This pivot is crucial for maintaining Europe’s competitive edge, as overly restrictive capital rules could drive institutional adoption toward jurisdictions with more flexible compliance frameworks.
The emphasis on preserving multi-issuance structures reveals the practical challenges of regulating global digital assets within regional borders. Without such mechanisms, major stablecoins like USDC might remain outside the EU’s direct regulatory scope, undermining MiCA’s goal of comprehensive oversight. As Brussels prepares for its 2027 overhaul, the outcome of this debate will likely determine whether Europe can attract large-scale stablecoin operations or if they will continue to operate via offshore entities. The interplay between U.S. issuers expanding abroad and Washington’s strategic use of dollar-pegged tokens adds geopolitical weight to these technical adjustments, suggesting that future MiCA revisions must balance consumer protection with the imperative to keep critical crypto infrastructure within the bloc.
