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Circle filed its response to the European Commission's MiCA review consultation on October 1, asking Brussels to scrap the rule requiring stablecoin issuers to park a fixed share of reserves in commercial bank deposits. Its argument is that the mandate increases exposure to banking-sector credit and counterparty risk rather than reducing it. That is the same objection Tether has made for two years while refusing MiCA authorisation entirely.
MiCA currently requires e-money token issuers to hold at least 30% of reserve assets in deposits at EU credit institutions, rising to 60% for tokens classified as significant. Circle wants those fixed percentages replaced with a minimum asset liquidity standard.
The two largest issuers have taken opposite routes through European regulation and arrived at the same complaint. One built a compliant business inside the perimeter and the other stayed out, and both say the deposit floor is the wrong tool.
A rule written to protect stablecoin holders from issuer failure instead ties the reserve to the solvency of whichever banks hold it. Circle has already lived through that.
Key Takeaways
- Circle filed its MiCA consultation response on October 1, 2026.
- It wants the 30% to 60% bank deposit mandate replaced with liquidity standards.
- Tether has rejected MiCA authorisation over the same reserve requirement.
- Circle also wants the 35% sovereign cap and 1.5% per-bank cap removed.
- Only three of the top 25 stablecoins are currently MiCA-regulated.
Circle Has Lived This Scenario
The submission cites the 2023 collapse of Silicon Valley Bank, which froze $3.3 billion of USDC reserves and briefly broke the token's peg. That is not a hypothetical risk in Circle's case but a documented event with a number attached.
The logic follows directly. A deposit is an unsecured claim on a bank, while a short-dated government bill is a claim on a sovereign, and mandating the former as a fixed share converts a holder-protection rule into bank exposure.
Banking relationships remain the least visible part of any issuer's structure. Tether's own disclosure after a US seizure this month showed how little is published about where issuer deposits actually sit, which we covered in our report on its EQIBank exposure.
Where Tether Already Stood
Paolo Ardoino has argued since MiCA's stablecoin provisions took effect that the deposit requirements would expose reserves to commercial bank failures. Tether never sought authorisation, and USDT was delisted across EU-regulated venues as a result.
This is not a joint submission or a coordinated campaign. Two companies with opposite regulatory strategies have independently reached the same objection, which is the part that gives the complaint weight.
The ECB Agrees, for the Opposite Reason
Circle explicitly aligns itself with the European Central Bank, which has suggested replacing the deposit floor with a requirement that a portion of reserves mature within one to five working days. The agreement is real, but the reasoning runs in reverse.
The European System of Central Banks has warned that large issuer deposits behave differently from ordinary retail deposits, and that heavy redemptions could force an issuer to pull large sums from its banking partners in a short window. Circle worries the banks might fail the issuers; the central banks worry the issuers might destabilise the banks.
Both conclusions point at removing the mandate. The US framework already leans the other way, requiring reserves in cash and short-term Treasuries, which we covered in our report on the Fed reserve proposals.
The Two Caps Nobody Discusses
Circle also asked the Commission to remove a 35% ceiling on exposure to any single sovereign and a limit holding deposits with any one bank to 1.5% of that bank's total assets.
Those two caps interact badly at scale. A large issuer cannot concentrate in the deepest government bill market, and it cannot place meaningful deposits with any single large bank, which forces reserves into a long tail of smaller counterparties.
Multi-Issuance and the Offshore Argument
Circle's second request is preserving multi-issuance, where an EU-authorised entity and a foreign-regulated counterpart co-issue the same token with dynamic rebalancing between global and EU reserves. It also wants a recognition regime for stablecoins regulated outside the bloc.
The submission references the Commission's own 2020 impact assessment, which warned that shutting foreign stablecoins out of EU markets would push users toward offshore providers. Circle's position is that restricting multi-issuance would relocate the activity rather than eliminate it.
Three Out of Twenty-Five
The number carrying the whole argument is adoption. Around 30 e-money tokens hold MiCA authorisation, but only three of the top 25 stablecoins by market value are MiCA-regulated.
That gap is the case Circle is making: a framework producing many compliant issuers and very little compliant volume. Europe's own regulated tokens illustrate the same point, including the dollar stablecoin launched last week alongside a euro token with negligible circulation, which we covered in our report on that MiCA dollar stablecoin.
FAQs:
1. What did Circle ask the European Commission to change?
In its MiCA review consultation response filed October 1, 2026, Circle asked for the mandatory bank deposit minimum to be replaced with a minimum asset liquidity requirement, for the 35% single-sovereign cap and 1.5% per-bank deposit cap to be removed, for multi-issuance to be preserved, and for a recognition regime covering stablecoins regulated outside the EU.
2. What does MiCA currently require?
E-money token issuers must hold at least 30% of reserve assets in deposits at EU credit institutions, rising to 60% for issuers of tokens classified as significant. Additional rules cap exposure to any single sovereign at 35% and limit deposits with one bank to 1.5% of that bank's total assets.
3. Why does Circle say bank deposits add risk?
Because a deposit is an unsecured claim on a commercial bank. Circle cites the 2023 Silicon Valley Bank collapse, which froze $3.3 billion of its USDC reserves, as evidence that mandating deposits concentrates issuer exposure to banking-sector credit and counterparty risk.
4. Is Tether part of this submission?
No. Tether has not sought MiCA authorisation, and chief executive Paolo Ardoino has separately argued that the deposit requirements could expose reserves to commercial bank failures. The two companies have reached the same objection independently rather than through any joint action.
5. How many stablecoins are MiCA-regulated?
Around 30 e-money tokens hold MiCA authorisation, but only three of the top 25 stablecoins by market value fall under the framework. Circle uses that gap to argue MiCA has produced regulated issuers without capturing the largest global tokens.
Disclaimer:
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