Circle Urges EU to Scrap 60% Bank Deposit Rule for USDC

Circle Targets MiCA Deposit Minimums

Circle has asked the European Commission to rewrite the reserve rules at the center of Europe's Markets in Crypto-Assets framework, arguing that mandatory bank deposits carry banking-sector risk into stablecoin backing. In its response to the MiCA review, the USDC and EURC issuer said e-money token issuers should not be forced to keep a fixed share of reserves at commercial banks. The current text requires at least 30% of reserves in bank deposits for regular issuers, rising to 60% for tokens designated significant. Circle wants those thresholds replaced with minimum liquidity requirements that measure how fast reserve assets can be converted into cash for redemptions, a design it says fits any fully reserved issuer, as distinct from algorithmic stablecoins. The European Central Bank and the EU's 27 national central banks made a similar proposal in September, asking regulators to set minimum proportions of reserve assets maturing within one and five working days. The European System of Central Banks, the same institutions studying a digital euro, a form of Central Bank Digital Currency, warned that issuer deposits can behave differently from ordinary retail deposits and that heavy redemptions could pass stress from a stablecoin into the commercial banks holding its reserves. Circle's position rests on hard experience: the USDC price briefly lost its dollar peg in March 2023 after the company disclosed that $3.3 billion of reserves were held at Silicon Valley Bank when the lender failed, and US authorities later protected the bank's depositors and freed the funds. The company also wants two reserve caps reconsidered: a 35% ceiling on exposure to a single sovereign, which it says restricts government-backed liquid assets available to dollar-denominated token issuers, and a counterparty limit equal to 1.5% of a bank's total assets, which it says forces large issuers to maintain relationships with numerous banks.

Multi-Issuance and the Wider Response

Reserves are only part of the submission. Circle urged the Commission to preserve “multi-issuance”, the structure under which an EU-authorized entity and a regulated counterpart outside the bloc jointly issue the same token while keeping the units fungible, with mechanisms to rebalance reserves between the two issuers. Restricting the model, Circle argued, would push European users toward offshore providers operating outside MiCA's protections. The company separately proposed a recognition system under which an overseas issuer stays primarily supervised in its home jurisdiction, distributes tokens in Europe through a locally licensed institution, and wins recognition from the European Banking Authority after a Commission assessment of the home framework. The deposit rules have already divided the market. Tether has declined to seek MiCA authorization for USDT, with CEO Paolo Ardoino arguing the deposit requirements could expose reserves to commercial bank failures, and in July OKX opened a route letting eligible European users convert USDT into MiCA-compliant USDC. Circle's own European structure rests on an Electronic Money Institution license granted by French regulators in July 2024, which has kept USDC and EURC available; EURC passed €400 million in circulation in August after its supply more than doubled over the previous year. Data published in July showed the combined capitalization of eight MiCA-compliant euro tokens had climbed 128% in the year through June 28, from $295.6 million to $673.9 million. Other respondents looked past stablecoins altogether: the Hyperliquid Policy Center asked the Commission to bring crypto perpetual futures under MiFID II and to recognize public blockchain records for transparency and recordkeeping obligations, while the Global Blockchain Business Council sought clearer token classification, proportionate safeguards and defined redemption responsibilities for tokens issued across jurisdictions.

These asks are proposals, not rules. The targeted consultation on reviewing MiCA closed on Wednesday, September 30, and its submissions now feed the Commission's assessment of how the regulation is functioning and which activities still fall outside its scope. Until the Commission legislates, the 30% and 60% deposit minimums and the 35% and 1.5% concentration caps stay binding on authorized e-money token issuers. The notable shift is convergence: Circle and the Eurosystem, usually on opposite sides of the deposit question, are both asking for liquidity-based reserve tests, handing the review a shared starting point. Any change must still clear the full EU legislative process.