Circle pushes Brussels to rethink MiCA reserve rules for global stablecoins
Circle is using the European Commission’s MiCA review to argue that bank-deposit minimums and reserve concentration caps could make regulated stablecoins less resilient, not safer. The filing matters because Europe is now deciding whether global dollar tokens can operate inside its rulebook or remain mostly offshore.
Europe’s stablecoin regime is moving from implementation into revision, and Circle is trying to shape the next draft before the largest dollar tokens settle outside the bloc’s perimeter. The USDC issuer submitted comments to the European Commission’s review of the Markets in Crypto-Assets regulation, arguing that several reserve rules meant to protect users could instead concentrate risk in the banking system and discourage global issuers from operating under European supervision.
The center of the dispute is MiCA’s treatment of e-money tokens. Under the framework described in Circle’s submission, stablecoin issuers must keep a defined share of reserves in commercial bank deposits, with the threshold rising for tokens deemed significant. Circle’s position is that a fixed deposit floor does not automatically improve liquidity. It can force issuers to hold more exposure to bank credit risk, while reducing room for short-term sovereign assets and other instruments that may be more liquid in stress.
That argument is not theoretical for Circle. In March 2023, USDC temporarily broke its dollar peg after the company disclosed that part of its cash reserves were held at Silicon Valley Bank. U.S. authorities later protected depositors, but the episode remains an important reference point for stablecoin reserve design: diversification across custody venues, duration management, and redemption liquidity can matter as much as the headline mix between deposits and securities.
Circle also asked policymakers to preserve multi-issuance structures, where an EU-authorized issuer and a foreign-regulated affiliate can support a globally circulating stablecoin. The company says restricting that model would not necessarily pull users into Europe’s safeguards. Instead, it could push activity toward offshore tokens that are widely used in trading, settlement, and cross-border payments but not supervised under MiCA.
The policy tension is straightforward. European regulators want stablecoins used by EU residents to have accountable local issuers, clear redemption rights, and high-quality reserves. Global issuers want the same token to remain fungible across venues and jurisdictions, because fragmented pools of liquidity weaken the utility that made dollar stablecoins useful in the first place. The review process is where those goals now collide.
The consultation also arrives as stablecoins become more infrastructure than speculation. Dollar tokens are increasingly used for treasury operations, exchange settlement, merchant flows, and payment corridors. For asset tokenization, the stablecoin layer often acts as the cash leg for subscriptions, redemptions, secondary-market trading, and collateral movement. If Europe’s framework creates a narrow channel for compliant stablecoin liquidity, tokenized fund and securities platforms may face higher operating friction in the region.
There is still a strong case for rigorous reserve rules. Stablecoin holders need confidence that tokens can be redeemed during market stress, and regulators have legitimate concerns about runs, bank exposure, concentration, and cross-border accountability. The question is whether prescriptive percentage requirements are the best way to get there, or whether supervisors should focus on liquidity coverage, asset quality, custody diversification, daily transparency, and clear responsibility for redemption.
For RWA markets, the outcome matters beyond Circle. MiCA is one of the first comprehensive attempts to regulate crypto assets at regional scale, so its stablecoin revisions will be read globally by issuers, banks, exchanges, and tokenization platforms. A workable framework could make Europe a serious venue for regulated onchain cash. A framework that captures many licensed issuers but little of the dominant liquidity could leave compliant RWA rails connected to a smaller payment layer than the market actually uses.
The next phase will be less about whether stablecoins should be regulated and more about how regulation maps onto global liquidity. Circle’s filing is a reminder that reserve safety, banking risk, and token fungibility are now part of the same policy conversation. For Europe, the challenge is to keep user protections high without designing a rulebook that regulated stablecoin activity routes around.