Circle Asks EU to Keep Multi-Issuance and Ease MiCA Reserve Rules

Circle published its response to the European Commission targeted review of the Markets in Crypto-Assets Regulation on Oct. 1, with EU strategy and policy director Patrick Hansen listed as author, according to the post. The filing draws on two years of operating as a MiCA-authorised e-money token issuer, the response says, and presents changes intended to keep global stablecoin activity inside EU supervision.

There is no new joint Circle-Tether filing or statement. CryptoSlate reported on Oct. 5 that the two issuers hold overlapping objections to bank-deposit rules, and characterized that overlap as common ground rather than coordinated action in its account. The cited record shows separate moves, with Circle filing on Oct. 1 and Tether stating its view earlier.

The response asks the Commission to preserve multi-issuance, under which a MiCA-authorised EU entity co-issues a stablecoin alongside a foreign-regulated counterpart. That structure is currently the only way global liquidity can circulate inside the regulatory perimeter, the filing says, citing the Commission 2020 impact assessment warning that blocking foreign stablecoins could push users offshore. Restricting the model would relocate use outside EU protections, according to the filing, which recommends formalizing safeguards, including dynamic rebalancing of reserves.

For the longer term, the filing proposes a second pathway, an equivalence and recognition regime for foreign-regulated stablecoins. Under the model, the Commission would decide whether a foreign regime is equivalent to EU standards, the response says, and the European Banking Authority would then recognize individual issuers. A Cointelegraph summary of the filing described the same two-tier design, with primary supervision remaining in the home jurisdiction and distribution in the EU through a locally licensed institution.

The proposal points to models under EMIR, CSDR, and MiFIR, as well as the United States equivalence regime for foreign payment stablecoins under the GENIUS Act, according to the response. The structure would also work in reverse, the filing says, supporting circulation of EU-issued stablecoins under reciprocal recognition arrangements abroad.

On market coverage, the response states that roughly 30 e-money tokens are now authorised under MiCA, more than under any comparable framework in a similar period. Yet only three of the top 25 stablecoins by market capitalization, USDC, USDG, and EURC, are MiCA-regulated, the filing says. CryptoSlate noted the same figures in its coverage, with the gap tied to perimeter and scale.

On reserves, MiCA now requires issuers to hold at least 30 percent of reserves in commercial bank deposits, rising to 60 percent for tokens classified as significant, the response says. Circle backs replacing those floors with a less rigid minimum liquidity requirement, arguing that mandatory deposits increase exposure to bank credit and counterparty risk, according to the post.

Cointelegraph wrote that Circle pointed to its own March 2023 experience, when USDC temporarily lost its dollar peg after the company disclosed 3.3 billion dollars in reserves at Silicon Valley Bank, in its report on the filing. The funds were later made available after United States authorities protected depositors, that report added.

The filing also asks for removal of two concentration limits introduced through European Banking Authority technical standards. One caps exposure to a single sovereign at 35 percent, which the response says prevents dollar-token issuers from holding mainly high-quality sovereign paper. The other limits deposits with one bank to 1.5 percent of that bank total assets, which the filing states would force larger issuers to spread reserves across dozens of banks, as outlined in the response.

Tether chief executive Paolo Ardoino said last month that Tether would not seek an EU license because of the same deposit rule. His Sept. 22 remarks warned that placing large stablecoin balances in banks could create vulnerabilities if lenders failed or faced heavy withdrawals, according to CryptoSlate reporting.

The European System of Central Banks made a parallel call on Sept. 22. The central banks urged removal of the 30 and 60 percent floors and backed liquidity thresholds based on assets maturing within one and five working days, as covered in an ESCB report. The ESCB cited draft Authority rules calling for significant tokens to hold 40 percent in assets maturing within one day and 60 percent within five days, with lower 20 and 30 percent levels for others, according to that report.

The ESCB also warned that a stablecoin run could force rapid deposit withdrawals and strain bank funding, while risks can flow the other way, as shown when the Silicon Valley Bank collapse hit USDC. Ardoino responded on X that central banks now sought deletion of the rule that led Tether to refuse a license, that report added.

The Article 54 deposit floors remain law while Brussels weighs changes. The Commission targeted consultation closed on Sept. 30, and responses will inform its assessment of whether the regulation remains fit for purpose, according to that summary. The Authority separately urged tighter treatment of third-country multi-issuer structures, warning that reserves, redemptions, and other functions can sit beyond effective EU supervision.

Circle said it issues USDC, the largest dollar token authorised under MiCA, and EURC, the largest euro token authorised under MiCA, in the response.