Circle urges EU to ease MiCA stablecoin reserve rules and preserve multi-issuance

Circle is urging the European Union to revise parts of its stablecoin framework, calling for looser reserve requirements and continued support for multi-issuance as policymakers review the Markets in Crypto-Assets Regulation.

In its response to the European Commission’s MiCA consultation, Circle argued that the framework has helped establish Europe as an early leader in stablecoin regulation but needs targeted changes to attract more global liquidity.

Circle said roughly 30 e-money tokens are now authorized under MiCA. However, only three of the world’s 25 largest stablecoins by market capitalization — USDC, USDG and EURC — currently operate under the framework, according to the company.

One of Circle’s main requests is preserving multi-issuance, a model in which the same globally circulating stablecoin can be issued by both a MiCA-authorized EU entity and a separately regulated entity outside the bloc.

Circle argues that restricting the model could push European users toward offshore stablecoins outside MiCA’s protections rather than bringing more global stablecoin activity under EU supervision. 

It proposed formalizing safeguards around multi-issuance, including mechanisms for dynamically rebalancing reserves between EU and global entities.

The issue has emerged as a significant point of debate in the MiCA review. The European Banking Authority has called for a dedicated regulatory and supervisory regime for third-country multi-issuance arrangements, citing the potential transfer of risks from global stablecoin activity into the EU.

Circle also wants the EU to eventually establish an equivalence and recognition regime for foreign stablecoin issuers, similar to arrangements already used in other areas of European financial regulation.

Under its proposal, the issuer would remain primarily supervised by regulators in its home jurisdiction. 

The European Commission would determine whether that regulatory regime is equivalent to EU standards, while the EBA would recognize individual issuers and distribution in Europe would occur through locally licensed institutions.

Circle is also pushing for changes to MiCA’s reserve rules.

The framework requires certain e-money token issuers to keep at least 30% of reserve assets in bank deposits, rising to 60% for significant tokens. 

Circle argues those requirements can increase exposure to bank credit and counterparty risks and should be replaced by a less rigid minimum liquidity requirement.

The company also wants regulators to remove a 35% concentration limit on exposure to a single sovereign and a rule limiting deposits with an individual bank to 1.5% of that bank’s total assets.

Circle argues the sovereign cap makes it difficult for dollar-denominated stablecoins to primarily hold highly liquid US government securities, while the bank concentration rule could force large issuers to spread reserves across dozens of banks.

The European Commission opened its MiCA review in May to assess whether the framework remains fit for purpose following its initial implementation and changes in global digital asset markets. 

Feedback from the consultation will inform a report that could ultimately be accompanied by proposals to amend the regulation.