Circle, the issuer behind USD Coin (USDC), is pressing European regulators to fundamentally rethink how stablecoin reserves are governed under the bloc's landmark crypto framework. In a formal push tied to the ongoing review of the Markets in Crypto-Assets (MiCA) regulation, Circle is calling for the elimination of mandatory bank-deposit minimums and their replacement with more flexible, liquidity-based reserve standards — a change that could reshape the competitive landscape for stablecoin issuers operating in Europe.
The stakes are considerable. MiCA, which came into full force for stablecoin issuers in mid-2024, was the first comprehensive regulatory framework of its kind globally, and the EU positioned it as a model for responsible digital asset oversight. But the rules came with rigid prescriptions around how issuers must hold reserves — specifically, requirements that a meaningful portion be kept in bank deposits. Circle's argument, in essence, is that this approach conflates regulatory caution with unnecessary financial inefficiency, and that it disadvantages stablecoin issuers relative to other financial institutions that operate under more principles-based liquidity standards.
The bank-deposit mandate was designed to ensure that stablecoin reserves remain accessible and low-risk — that in a crisis, holders could redeem their tokens without delay. That logic is sound. But Circle's position is that mandatory minimums tied to a specific instrument type, namely bank deposits, are a blunt tool. More flexible liquidity requirements — ones that focus on the quality, convertibility, and duration of reserve assets rather than their exact form — would achieve the same protective outcome while allowing issuers to manage reserves more efficiently. This is the model that treasury and money-market regulation often applies to analogous instruments, and Circle is arguing that stablecoin reserves deserve similar treatment.
The second pillar of Circle's MiCA review submission is arguably just as consequential: the preservation of cross-border stablecoin issuance. MiCA's current structure grants passporting rights to issuers who obtain authorization in one EU member state, theoretically allowing them to serve the entire single market. But the practical application of those rights — particularly as national competent authorities develop their own supervisory interpretations — risks fragmenting what should be a unified market. Circle wants the review to lock in and strengthen those cross-border issuance protections, preventing regulatory drift toward a patchwork of national rules that could balkanize the euro-area stablecoin market.
This is not an abstract concern. The European stablecoin market remains dominated by dollar-denominated tokens, with euro-backed stablecoins representing a comparatively small share of on-chain activity. If MiCA's reserve rules make operating in Europe structurally more expensive — by forcing issuers to park assets in lower-yielding bank deposits rather than high-quality liquid alternatives — the regulation risks entrenching that dollar dominance rather than fostering a competitive euro stablecoin ecosystem. That outcome would be particularly ironic given that one of MiCA's implicit goals was to cultivate European competitiveness in digital finance.
Circle's intervention also arrives at a politically sensitive moment. The European Central Bank has long expressed discomfort with large-scale private stablecoins, particularly those denominated in foreign currencies, viewing them as a potential threat to monetary sovereignty and financial stability. Any relaxation of reserve requirements will need to navigate that institutional skepticism. Regulators in Paris, Frankfurt, and Brussels are unlikely to simply accept an industry lobbying position at face value — they will scrutinize whether flexible liquidity rules genuinely deliver equivalent protection, or whether they are a trojan horse for looser oversight dressed in the language of efficiency.
What Circle is really doing here is trying to shape the second draft of the most important crypto regulation on earth before it hardens. MiCA's review cycle offers a narrow window — these frameworks, once embedded in EU law, tend to calcify quickly. The arguments Circle is making are technically coherent: liquidity adequacy, not deposit form, is what protects redemption rights. But the political economy of European financial regulation means that coherent arguments must also be politically acceptable ones. The company will need to persuade not just technocrats but member-state officials who remain instinctively cautious about loosening rules on instruments that some still view with deep suspicion.
If Circle succeeds even partially — securing either a relaxation of deposit minimums or a stronger cross-border issuance framework — it would represent a meaningful shift in how MiCA treats stablecoin infrastructure. For the broader digital asset industry, which has watched Europe set the global regulatory template, the outcome of this review process will matter far beyond the EU's borders.
Written by the editorial team — independent journalism powered by Bitcoin News.