Circle Wants EU’s 30% Stablecoin Reserve Rule Swapped for Liquidity Test

Circle has asked the European Commission to overhaul EU stablecoin reserve rules, proposing to swap mandatory bank-deposit allocations for a liquidity-based standard instead. The request, submitted in an Oct. 1 summary of Circle’s response to the European Commission’s MiCA consultation, puts the USDC and EURC issuer alongside European central banks in calling for changes to how stablecoin issuers must back their tokens.

Key takeaways

• Circle wants bank-deposit minimums under MiCA swapped for a liquidity-based reserve test.
• MiCA currently sets deposit floors of 30% for standard tokens and 60% for significant ones.
• The European System of Central Banks favors reserve maturity windows of one to five working days over fixed deposit shares.
• Circle also wants the EBA’s 35% sovereign-exposure cap and 1.5% single-bank deposit cap scrapped.
• The Commission’s MiCA consultation closed Sept. 30 and may feed into a future legislative proposal.

Circle’s Case for Rewriting Stablecoin Reserve Requirements

Circle’s central argument is that fixed bank-deposit minimums do more harm than good. According to a report by The Defiant, the company told the European Commission that the deposit floors built into MiCA push issuers deeper into banks’ credit and counterparty risk. Circle is pushing for what it calls a “less rigid minimum asset liquidity requirement” in place of the current percentage-based mandate.

Under the existing framework, issuers must hold at least 30% of reserves backing ordinary e-money tokens in separate bank accounts, with that floor rising to 60% once a token is classified as significant. Whatever remains must be held in safe, low-risk assets that are highly liquid and denominated in the same currency as the token. Circle’s own USDC and EURC white papers describe both tokens as non-significant as of their respective publication dates, meaning the 30% floor currently applies to Circle’s reserves.

In addition, Circle wants the European Union to eliminate two concentration thresholds found in European Banking Authority technical standards, namely a 35% cap on exposure to a single sovereign and a restriction capping deposits held at any single bank at 1.5% of that bank’s total assets. Circle argues these limits constrain dollar-denominated sovereign holdings and force larger issuers to scatter deposits across dozens of banks just to stay compliant.

Where European Central Banks Agree — and Where They Don’t

European monetary authorities share Circle’s skepticism about fixed deposit minimums, but they propose a different fix. The European System of Central Banks, in a September response, also called for removing the hard deposit floors. Its alternative would instead require a minimum share of reserves to mature within one to five working days, a maturity-based test rather than a deposit-ratio one.

The central banks’ reasoning diverges sharply from Circle’s on diversification, though. Their response warns that a sudden run on a stablecoin could force an issuer to pull deposits out of its banking partners all at once, transmitting financial stress directly into the banking system. Rather than loosening concentration limits as Circle wants, the central banks recommend tightening counterparty limits for significant stablecoins and studying a system-wide cap on how much deposit funding banks can take from stablecoin issuers collectively. They also note the relevant EBA reserve standards are still waiting for Commission approval.

Cross-Border Issuance Faces Its Own Legal Fight

Beyond reserve composition, Circle wants Brussels to formally protect multi-issuance — an arrangement where an EU-authorized entity and a foreign-regulated counterpart issue the same globally circulating stablecoin, with safeguards including rebalancing between global and EU-specific reserves. That structure already underpins how USDC works in Europe: Circle’s French entity became a second USDC issuer in July 2024, and the French-issued tokens are fully interchangeable with USDC issued by Circle’s U.S. entity. EURC works differently, with the French entity as its sole issuer since July 2024.

EEA holders have a redemption claim against Circle’s French entity, though that claim is subject to anti-money-laundering checks. European central banks are not convinced the current legal basis supports this cross-border setup at all. Their response argues MiCA would need a legislative amendment to properly permit co-issuance, warning that EU reserves could face redemption demands tied to tokens issued abroad, while transfers of foreign reserves back into the bloc could be restricted precisely when markets are under stress.

For the longer term, Circle has floated a separate equivalence-and-recognition regime: the Commission would vet a foreign jurisdiction’s rules, the EBA would recognize individual issuers under that regime, and a locally licensed EU institution would handle distribution, while issuers stay primarily supervised in their home market. Circle says reciprocal arrangements under this model could also help EU-issued stablecoins like EURC circulate internationally.

What Happens to the EU Stablecoin Reserve Rules Now

The European Commission’s MiCA consultation closed on Sept. 30. The responses gathered, including Circle’s, will feed into a Commission report on how MiCA is working in practice — a report the Commission has said may come with a legislative proposal if one is warranted.

Article produced with the assistance of artificial intelligence and reviewed by the editorial team.