Circle, the issuer of USDC and EURC, has urged the European Commission to rethink key parts of the Markets in Crypto-Assets Regulation (MiCA) during its review process. In a response submitted to a consultation on whether MiCA remains fit for purpose as crypto markets evolve, Circle argued that MiCA’s current reserve rules for certain stablecoins create unnecessary exposure to bank-sector credit and counterparty risk.

The Commission’s targeted consultation closed Wednesday, and responses will feed into the regulator’s assessment of MiCA both within its current scope and for potential activities that may fall outside it. Circle’s proposal centers on how stablecoin reserves should be held and how concentrated they can be across counterparties.

Key takeaways

Circle says MiCA’s mandatory minimum bank-deposit reserve requirements can expose stablecoin issuers to banking credit and counterparty risk.
USDC’s temporary de-peg in March 2023 is cited as an example of how reserve concentration in a single bank can escalate quickly.
Circle supports shifting from fixed deposit minimums toward a more flexible “minimum asset liquidity” standard.
It also calls for removing reserve concentration limits, including caps tied to single sovereign exposure and deposits with each counterparty.
Circle and other industry groups urged the Commission to avoid narrowing multi-issuance models and to improve how rules apply to onchain market structures like perpetual futures.

Why Circle wants MiCA reserve rules changed

Circle’s filing focuses on the mechanics of stablecoin reserves under MiCA. The regulation currently requires e-money token issuers to hold at least 30% of reserves in commercial bank deposits, with a higher minimum of 60% for issuers designated as “significant,” according to Circle.

Circle’s core argument is that deposit-heavy reserve structures can transfer risks from crypto infrastructure to the banking system. In its response, the company pointed to its own experience during the 2023 banking turmoil, when USDC briefly lost its dollar peg after Circle disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank.

Circle said those funds were later made available after US authorities protected the bank’s depositors, and USDC recovered. The episode is widely regarded across the sector as a stress test for how stablecoins can react when reserve custody is concentrated in vulnerable institutions.

Aligning with the European Central Bank on liquidity

Rather than keeping deposit requirements as a fixed percentage of reserves, Circle asked the Commission to consider replacing them with a more adaptable liquidity standard. Circle said this approach would align with the European Central Bank’s thinking, adding that a “minimum asset liquidity requirement” could better reflect the goal of ensuring stablecoin redemptions can be met under stress.

Circle also recommended removing two reserve concentration limits embedded in the existing framework: a 35% cap on exposure to a single sovereign and a deposit cap with each counterparty set at an amount equivalent to 1.5% of that bank’s total assets.

Supporters of concentration limits argue that they reduce “single point of failure” risk. Circle’s stance, by contrast, implies that rigid caps and forced deposit ratios may not always produce the desired resilience if the underlying liquidity and redemption capacity are strong but the regulatory form remains deposit-centric.

Multi-issuance and the risk of pushing users offshore

Circle also asked the Commission to preserve “multi-issuance,” a structure through which an entity authorized under EU rules can co-issue a stablecoin with a foreign-regulated counterpart.

Circle argued that restricting this arrangement would likely push users toward providers located outside MiCA’s perimeter—undermining the regulation’s purpose of bringing stablecoin activity under a consistent supervisory regime. The company’s concern is not simply competitive; it’s about whether MiCA’s protections meaningfully extend to the end users and redemption pathways that support stablecoin usage across borders.

Other industry responses: onchain market rules and clearer frameworks

Circle’s response was not the only submission to the MiCA consultation. Other groups used the process to press for rule clarity around how MiCA should intersect with existing financial market legislation and how crypto-native transparency can satisfy recordkeeping obligations.

The Hyperliquid Policy Center, in a separate response, urged the Commission to treat crypto perpetual futures under the EU’s existing securities and derivatives framework—specifically the Markets in Financial Instruments Directive (MiFID II). The group said the regulatory approach should be tailored to perpetual futures’ market structure and also recognized public blockchain records as a potential source for meeting transparency and recordkeeping requirements.

The Global Blockchain Business Council (GBBC) recommended clearer token classification and stablecoin safeguards that are proportionate to risk. It also asked for less duplication between MiCA and payment-services rules, which could otherwise create compliance burdens without improving consumer protection.

For cross-border stablecoin issuance, GBBC said redemption responsibilities should be clearly defined, reserve rebalancing should be enforceable, and supervision should be accountable within the EU framework.

What to watch next

As the Commission digests responses to the MiCA consultation, the key question for market participants will be whether the review moves from fixed reserve deposit ratios toward a liquidity-focused standard—and how that shift will be reconciled with concentration limits. Investors, issuers, and users should also monitor whether the Commission preserves multi-issuance models while tightening market-structure rules for onchain products such as perpetual futures.