Circle proposes replacing mandatory bank deposits with a liquidity standard
Circle has proposed changes to MiCA that would allow stablecoin issuers regulated outside the European Union to distribute tokens in Europe without obtaining full EU authorisation. Under the proposal, the European Commission would assess the equivalence of the foreign regulatory framework and the EBA would recognise individual issuers, which would remain primarily supervised in their home country.
Circle also calls for preserving multi-issuance, under which a European entity authorised under MiCA co-issues a stablecoin with a counterparty regulated abroad. The company said that only three of the 25 largest stablecoins by market capitalisation – USDC, USDG and EURC – are currently regulated under MiCA.
Circle challenges the requirement for electronic money token issuers to hold at least 30% of reserves in deposits with commercial banks, a threshold that rises to 60% for significant tokens. The company proposes a broader liquidity standard, arguing that mandatory deposits increase exposure to banks’ credit and counterparty risk.
The position echoes criticism from Tether CEO Paolo Ardoino, who said concentrating reserves in banks could create vulnerabilities if those institutions failed or could not meet large redemption requests. Ardoino said Tether did not seek an EU licence because of the same requirement. The EBA instead urged the Commission to strengthen MiCA against the risks of multi-issuer structures involving third countries. The Commission’s consultation closed on 30 September and could lead to legislative changes.
