Circle Urges EU to Drop Mandatory Bank Deposits From Stablecoin Reserves

Circle, the issuer of USDC and EURC, is asking the European Commission to rework MiCA rules for stablecoins. The main demand concerns reserves. The company wants to drop the mandatory share of bank deposits. On Thursday, October 1, Circle published a summary of its response to the public consultation on reviewing the regulation.

What exactly is Circle asking for?

According to Decrypt and Cointelegraph, the Commission's consultation closed on Wednesday. It gathered feedback on how MiCA (the Markets in Crypto-Assets Regulation, the EU's single crypto rulebook) works and whether it still fits a changing market. The responses will feed into the Commission's assessment of the regulation.

Circle's argument goes like this. MiCA gave Europe plenty of licensed issuers but failed to capture the world's largest tokens. Of the 25 biggest stablecoins by market value, only three operate under MiCA.

Separately, the company asks to preserve "multi-issuance". This is a setup where a stablecoin is co-issued by an entity authorized in the EU and a foreign issuer licensed in its own jurisdiction. In Circle's words, restricting the model would only push users toward offshore providers outside MiCA's protections.

What are the current reserve requirements?

To see what the complaint is about, it helps to look at the numbers. Issuers of e-money tokens must keep part of their reserves in commercial bank accounts. For tokens the regulator deems significant, the threshold is higher.

Circle proposes changing four things:

• Replace mandatory minimums with a flexible liquid-asset requirement.
• Remove the 35% cap on exposure to one sovereign's debt.
• Scrap the ceiling on deposits at a single bank, equal to 1.5% of that bank's total assets.
• Keep multi-issuance in place.

Why are bank deposits seen as a risk?

Circle argues that mandatory deposits raise an issuer's exposure to banking-sector credit risk. The company knows this firsthand. In March 2023 USDC briefly lost its dollar peg after Circle disclosed that $3.3 billion of its reserves sat at Silicon Valley Bank. The funds became available once US authorities protected the bank's depositors.

The one-bank ceiling creates a different problem. As Circle explained, large issuers would have to spread reserves across dozens of banks. On the flexible liquidity requirement, the company sided with the European Central Bank, which also favors replacing rigid minimums.

Who else wrote to Brussels?

The Hyperliquid Policy Center, according to Cointelegraph and The Block, asks that perpetual futures be treated under the existing MiFID II directive. The group also wants public blockchain records recognized as a way to meet transparency and recordkeeping rules. Separately, more than 50,000 Europeans urged the EU to ease restrictions on stablecoin rewards.

European issuers are making the case for dollar tokens. Germany's AllUnity launched USDAU, a dollar-pegged stablecoin under MiCA, on Wednesday. CEO Alexander Höptner told Cointelegraph that in global trade and FX markets the dollar "is the glue", so European companies need more than a euro token. Stable Mint said its USDSM has moved more than $380 million across 3.8 million transfers and is held by more than 2,600 addresses.

What to expect next

According to Decrypt, Brussels is due to revise MiCA in 2027 to better cover foreign stablecoin issuers. For now these are only the positions of market players, and the Commission has made no decision. Regulators are also pressing platforms like Binance over compliance with MiCA.