Circle Calls for EU to Adjust Stablecoin Reserve Rules in MiCA Review

Circle has asked the European Commission to reconsider parts of the Markets in Crypto-Assets Regulation (MiCA) framework for stablecoin reserve rules, arguing that rigid requirements tied to bank deposits can expose issuers—and indirectly token holders—to banking-sector credit and counterparty risk.

In a response to the Commission’s MiCA review consultation, Circle said mandatory levels of commercial bank deposits are the wrong tool for managing reserve safety. The submission highlights why this concern is not theoretical, pointing to the USDC dollar peg disruption in March 2023 after Circle disclosed that $3.3 billion in USDC reserves were held at Silicon Valley Bank. Depositor protection measures and subsequent actions to make funds available ultimately enabled USDC to restore its peg.

Key takeaways

• Circle warns MiCA’s deposit-minimum approach can increase banking credit and counterparty exposure for stablecoin issuers.
• The stablecoin issuer points to the 2023 USDC depeg linked to reserves held at Silicon Valley Bank as a real-world stress test.
• Circle supports replacing fixed deposit minimums with a more flexible liquidity/asset-based requirement aligned with central bank thinking.
• Industry groups also asked for MiCA changes affecting onchain market rules and clearer token classifications.

Circle’s case against mandatory deposit minimums

Circle’s response comes as the European Commission seeks feedback on how MiCA is working and whether the regulation remains fit for purpose as crypto markets evolve. The consultation, which closed on Wednesday, is intended to inform the Commission’s broader assessment of MiCA and activities that may sit outside its current scope.

Under MiCA, e-money token issuers must hold at least 30% of reserves in commercial bank deposits, with a higher minimum of 60% for “significant issuers.” Circle argues that this deposit-heavy structure should be revisited because it pushes reserves into the banking system even when issuers could instead maintain liquidity through alternative high-quality, readily available assets.

Circle also said it aligns with the European Central Bank’s view that issuers should face a “minimum asset liquidity requirement” rather than fixed deposit minimums. That shift matters because it could change how reserves are structured day-to-day—potentially reducing the likelihood that a stablecoin’s redemption capacity is tied to a single type of intermediary risk.

Learning from the Silicon Valley Bank episode

Circle’s concerns are rooted in its experience during the Silicon Valley Bank collapse. As Circle disclosed in March 2023, $3.3 billion of USDC reserves were held at the bank. When SVB failed, USDC temporarily lost its dollar peg, underscoring how reserve concentration in bank deposits can translate into token instability during banking-sector shocks.

Circle later noted that the funds were made available after US authorities protected depositors, enabling USDC to recover its peg. The key point Circle appears to be making to European regulators is that MiCA’s reserve structure should better account for the risk that even well-regulated stablecoin reserves can become vulnerable when they are concentrated within bank balance sheets.

What Circle wants to change in MiCA

Beyond reducing reliance on deposit minimums, Circle urged the Commission to remove two reserve concentration limits that it says can restrict portfolio flexibility without necessarily improving real-world safety. In particular, Circle cited:

• A 35% cap on exposure to a single sovereign.
• A cap tied to each counterparty, limiting deposits with a single bank to an amount equivalent to 1.5% of that bank’s total assets.

Circle also asked the Commission to preserve “multi-issuance,” a model in which an EU-authorized entity and a foreign-regulated counterpart co-issue a stablecoin. Circle argued that narrowing or removing that structure would likely push users toward offshore providers outside MiCA’s protections, rather than strengthening transparency and supervision within the EU framework.

Other consultation responses: onchain markets and token classification

Circle was not alone in seeking adjustments to MiCA’s implementation. The Hyperliquid Policy Center, in its own response, urged the Commission to ensure that crypto perpetual futures are treated under the EU’s existing securities and derivatives framework—specifically MiFID II.

The group argued that obligations should be tailored to the way perpetual futures markets function, and it suggested recognizing public blockchain records as a practical way to satisfy transparency and recordkeeping requirements.

Separately, the Global Blockchain Business Council (GBBC) recommended clearer token classification rules, proportionate stablecoin safeguards, and less duplication between MiCA and payment-services rules. For cross-border stablecoin issuance, GBBC called for clear redemption responsibilities, enforceable reserve rebalancing, and an accountable EU supervisory framework.

What to watch as the MiCA review moves forward

As the Commission digests these submissions, the main question for stablecoin holders, issuers, and compliant intermediaries is whether MiCA’s reserve model will evolve from deposit-centric constraints toward a framework that better reflects liquidity management and banking-system counterparty risk. Future draft guidance or legislative proposals will likely clarify how flexible liquidity requirements would be measured in practice—and whether the supervisory approach will shift alongside the rules.