Circle has asked the European Commission to rewrite key parts of MiCA, the EU’s crypto rulebook, arguing that fixed reserve deposit requirements push stablecoin issuers into unnecessary banking risk. The response, submitted October 1 to the Commission’s targeted MiCA review, draws on two years of operating as a MiCA-authorized e-money token issuer, per Circle’s own blog post.
The rules Circle targets are specific. MiCA requires e-money token issuers to hold at least 30 percent of reserve assets in commercial bank deposits, and issuers of significant e-money tokens must hold up to 60 percent. Circle argues that this structure, designed to guarantee stability, actually increases exposure to banking-sector credit and counterparty risk, the opposite of what most people expect from a pegged token.
Circle aligns itself with the European Central Bank on this point. The ECB has also said the mandatory deposit requirement should be reconsidered, though for different reasons, mainly the risk that sudden redemptions could strain lenders that hold the deposits. Circle proposes replacing the fixed deposit thresholds with a minimum asset liquidity requirement that scales to how redeemable an issuer’s reserves actually are, rather than where they sit.
Concentration caps under fire
Beyond deposits, Circle wants two concentration rules from the European Banking Authority’s Level 2 technical standards removed. One caps exposure to a single sovereign at 35 percent of reserves. The other limits deposits with any individual banking counterparty to 1.5 percent of that bank’s total assets.
For a dollar-denominated token the size of USDC, the combined effect is severe. Circle says the rules could prevent issuers from holding primarily sovereign high-quality liquid assets, the safest instruments available, and force larger issuers to maintain working relationships with dozens of banks just to park reserves. Each additional bank adds another counterparty, not less risk, which inverts the logic the rule was written under.
The company also urged the Commission to preserve multi-issuance, the structure that allows a globally circulating token to be issued by a MiCA-authorized EU entity alongside a foreign-regulated counterpart. EU regulators have been examining how reserves and redemption obligations work across jurisdictions in that setup, and Circle wants the treatment clarified rather than tightened.
Only three of the top 25
Circle’s sharpest line of argument is quantitative. It counts roughly 30 e-money tokens holding MiCA authorization, but only three of the 25 largest stablecoins globally by market capitalization are regulated under the framework. Circle names USDC, USDG and EURC as those three.
That gap sits at the center of the request. Europe’s rules are strict, but strict rules that the biggest issuers avoid are not achieving uniform protection. Tether, whose USDT is the largest token in the space, has said publicly it did not seek a MiCA license, with CEO Paolo Ardoino pointing at the reserve deposit requirements, particularly the escalation to 60 percent for significant tokens, as the reason.
To close that gap, Circle proposes an equivalence and recognition regime. Under the model, the European Commission would assess whether a foreign jurisdiction’s stablecoin framework is equivalent to MiCA, and the European Banking Authority would recognize individual issuers under it. Distribution inside the EU would still run through a locally licensed institution. The idea is to let foreign-regulated issuers access the EU market without forcing them to rebuild reserve structures that work for their home jurisdiction but not for Europe’s.
A consultation with real stakes
The submission went into a targeted review the Commission opened earlier this year. Stripe-owned Bridge joined the MiCA register as an authorized e-money token issuer in August after securing approvals in Luxembourg, showing the framework can absorb well-funded entrants, but the list of authorized issuers remains short relative to the size of the global market.
What happens next depends on how the Commission weighs the risk argument. MiCA’s deposit requirements were designed with bank failures in mind: if a stablecoin issuer holds reserves in banks, a bank run could look like a stablecoin depeg, and vice versa. Circle’s counterargument is that this framing misreads how modern stablecoin reserves actually work, since issuers already hold large positions in short-dated sovereign debt rather than sitting on bank balances.
Central banks have not been shy about their own concerns. The ECB and EU national central banks have separately asked for changes to MiCA’s treatment of stablecoin bank deposits, warning that sudden redemption waves could strain lenders. Circle’s position, in effect, is that regulators and issuers now agree on the diagnosis even if they differ on the replacement rules, which gives the review a better chance of producing changes than a purely industry-driven request would.
The review consultation runs until the end of October, after which the Commission will decide whether to propose amendments. Any reforms would move through the EU’s comitology process, giving the European Banking Authority a role in drafting new technical standards. Timing is uncertain, and legislative amendments to a regulation of this scope could take more than a year to land.
For stablecoin users in Europe the practical stakes are narrower access. As the rules stand, US residents and businesses can use tokens from the largest global issuers, while EU customers face a shorter list. If the equivalence regime is adopted, that list could expand significantly. If not, MiCA may continue to operate as a regional standard that the biggest global players treat as optional, and the three-of-the-top-25 ratio Circle cites would stay roughly where it is.