Circle and Tether find common ground against MiCA’s bank reserve rules

Circle is urging the European Union to open its Markets in Crypto-Assets Regulation (MiCA) to foreign-regulated stablecoins and loosen reserve rules that constrain global issuers.

The USDC issuer proposed a recognition regime that could let qualifying overseas stablecoin companies distribute tokens in Europe without becoming fully authorized EU issuers, as part of a broader push to bring more of the global market inside the bloc’s regulatory perimeter.

Circle said only three of the world’s 25 largest stablecoins by market value, USDC, USDG and EURC, are currently regulated under MiCA, despite roughly 30 e-money tokens securing authorization since the framework took effect.

Under its proposal, the European Commission would first determine whether a foreign jurisdiction’s regulatory regime is equivalent to EU standards. The European Banking Authority (EBA) would then recognize individual issuers, which would remain primarily supervised in their home countries while distributing tokens through locally licensed institutions.

That would create an alternative to current MiCA rules, which generally require e-money token issuers seeking public distribution or trading in the bloc to obtain EU authorization.

Circle also wants regulators to preserve multi-issuance, where a MiCA-authorized European entity co-issues a globally circulating stablecoin with a foreign-regulated counterpart. The company said restricting that structure risks pushing European users toward offshore platforms and tokens outside MiCA’s protections.

Circle is also challenging a requirement that e-money token issuers keep at least 30% of reserves in commercial-bank deposits, rising to 60% for tokens classified as significant. It wants the requirement replaced with a broader liquidity standard, arguing mandatory deposits increase issuers’ exposure to bank credit and counterparty risk.

That argument echoes criticism previously made by Tether Chief Executive Officer Paolo Ardoino, who warned that forcing large stablecoin issuers to place substantial reserves in banks could create systemic vulnerabilities if those institutions failed or could not meet large withdrawals. Ardoino said last month that Tether declined to seek an EU license because of the same requirement.

The overlap is notable because Circle chose to comply with MiCA while Tether kept USDT outside the framework. Both now argue that requiring stablecoin issuers to concentrate liquidity in commercial banks can introduce risks regulators are seeking to contain.

Circle also wants the EU to remove a 35% cap on exposure to a single sovereign and a rule limiting deposits with an individual bank to 1.5% of that lender’s total assets. It said the restrictions can prevent dollar stablecoins from relying heavily on high-quality sovereign securities and force large issuers to spread reserves across dozens of banks.

Yet regulators are considering tighter controls elsewhere. The EBA last month urged the Commission to strengthen MiCA against risks arising from third-country multi-issuer stablecoin structures, warning that reserves, redemptions and other critical functions can sit beyond effective EU supervision.

The Commission’s MiCA review consultation closed Sept. 30, and its findings could lead to legislative amendments. Circle’s recognition proposal therefore offers no immediate route into Europe: foreign issuers remain subject to the existing framework while Brussels decides whether opening MiCA to more global liquidity is worth loosening some of the barriers that kept it out.

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