Circle fired its best shot at Europe’s crypto rulebook this week, asking regulators to scrap the requirement that stablecoin reserves sit partly in commercial bank deposits.
The USDC issuer’s comments landed on October 1, in response to the European Commission’s targeted consultation on the Markets in Crypto-Assets Regulation. The submission is a characteristically blunt ask, and the reception matters more than usual because the European Central Bank and the EU’s banking regulator have both flagged the same concern with the current setup. Depending on what the Commission does with the feedback, Europe’s stablecoin market could look very different in a couple of years.
The rule Circle wants changed
MiCA requires e-money token issuers to hold at least 30% of their reserve assets in commercial bank deposits. For issuers of tokens classified as significant, the minimum climbs to 60%. State-chartered French and German banks have leaned on this requirement as evidence that Europe’s framework is genuinely conservative, and for issuers trying to win institutional trust, holding reserves at named banks has been part of the pitch.
Circle argues the requirement backfires. Holding reserve assets with a small number of commercial banks concentrates credit and counterparty risk in exactly the place stablecoin issuers are least equipped to absorb a shock, the global banking system itself. A run on one of the deposit banks would leave a stablecoin issuer holding significant assets it might not be able to access quickly, even if the underlying token is fully backed. The company is speaking from experience: in March 2023, USDC briefly lost its dollar peg after Circle disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank, a bank that regulators wound up rescuing.
The submission asks the Commission to replace the fixed deposit minimum with a less rigid minimum asset liquidity requirement, one calibrated to how quickly reserve assets can be accessed for redemptions rather than to where they sit. Circle also wants two concentration limits removed: a 35% cap on exposure to a single sovereign, and a ceiling on deposits with each counterparty equal to 1.5% of that bank’s total assets. That ceiling pushes larger issuers into maintaining reserve relationships with dozens of separate banks, adding operational complexity without reducing the underlying risk.
The ECB and EBA see the same problem
Circle is not alone. The European Central Bank, along with the EU’s 27 national central banks, filed its own response to the same consultation and reached a similar conclusion on reserve requirements. Separately, the European Banking Authority’s own response to the review flagged that the 30% and 60% deposit minimums “pose vulnerabilities” tied to interconnectedness with the banking sector, while rating the current rules only “moderately appropriate” when asked directly whether the thresholds are the right way to manage stability.
That matters because it is unusual for the issuer, the monetary authority and the prudential regulator to land on the same side of a design question that splits most financial rulemaking. It gives the Commission an unusually clear signal that the market and its supervisors agree the current thresholds were calibrated for a different market structure than the one Europe actually has in 2026.
Nothing in the consultation process binds the Commission to act. The review, which closed September 30 with an initial deadline in August that was pushed back to fit the flow of responses, is a fact-finding exercise, and the Commission has discretion over whether to follow up with legislative amendments, delegated acts, or nothing at all.
Why it matters for the market
For Circle, the submission is partly self-interested and partly defensive. The company operates as a MiCA-authorized e-money token issuer and issues both USDC and EURC under the framework. Its own USDC and EURC reserve assets are subject to the deposit minimums it now wants relaxed, and every dollar of reserves parked at a commercial bank is a dollar of credit exposure to that bank. Circle also wants multi-issuance preserved, the structure through which a European Union-authorized entity and a foreign-regulated counterpart co-issue a single stablecoin, which keeps international issuers able to serve European customers without spinning up fully separate EU legal entities.
The conversation is happening against a wider European context where regulators are also discussing whether stablecoins should be allowed in retail investor accounts at all, and where a handful of member states have resisted the idea of open exposure to stablecoins in retail channels. A framework change still has to survive that politics.
Where things stand
Deutsche Börse and the Chamber of Progress also filed responses to the review, as did the Hyperliquid Policy Center, which argued in the same filing window that crypto perpetual futures should be regulated under the EU’s 2014 MiFID II derivatives framework, not under MiCA. That gives the Commission a dense set of overlapping arguments to weigh, not all of which point in the same direction.
For anyone tracking the shape of European crypto regulation, the next signal to watch is not the substance of the responses, which are public, but the Commission’s own statement, which is not. Whether it publishes a proposal to recalibrate the reserve rules, defers the question to the European Banking Authority’s technical standards process, or simply files the submissions without acting will tell you whether this review was a genuine recalibration exercise or a compliance ritual.
| Regulator or issuer | Position on deposit minimums | Key argument |
|---|---|---|
| Circle | Replace with a liquidity requirement | Bank deposits concentrate credit and counterparty risk in the banking sector itself |
| European Central Bank | Reconsider the minimum | Fixed 30-60% thresholds are too rigid for a maturing stablecoin market |
| European Banking Authority | Rating “moderately appropriate” | Bank deposit holdings increase interconnectedness with the banking sector |
| Deutsche Börse | Filed a response | Did not call for scrapping the deposit rule |
| Chamber of Progress | Filed a response | Did not call for scrapping the deposit rule |
None of this changes anything in the short term for stablecoin users in Europe, who continue to interact with USDC and EURC through MiCA-authorized issuers under the current regime. What it changes is the direction of travel for the next two years, and the degree to which Europe wants to keep transacting in digital dollars and euros through a specific set of commercial bank counterparts rather than a broader pool of liquid reserve assets.
Circle’s own submission is public, as are the responses from the ECB, EBA and other market participants who chose to publish. The Commission’s consultation portal lists the review, and reporting on the submissions has come from crypto.news, The Block and Cointelegraph, among others.