Stablecoin issuer Circle urged the European Commission to overhaul mandatory bank deposit obligations across the European Union. Published on October 1, 2026, Circle’s formal consultation response recommends replacing rigid cash reserve quotas with flexible high-quality liquid asset standards to protect market stability.
Under the Markets in Crypto-Assets regulation, e-money token issuers must hold at least 30% of their reserves in commercial bank deposits. That minimum rises to 60% for tokens classified as significant, creating operational exposure to traditional banking counterparties across member states.
Circle submitted its technical feedback to the European Commission MiCA consultation, which officially closed on September 30, 2026. The European executive opened the inquiry to review how the regulatory framework operates and whether existing provisions remain suitable for evolving market structures.
The issuer of USDC and EURC noted that mandatory banking deposits concentrate credit risk instead of mitigating it. In March 2023, Circle held $3.3 billion of reserves at Silicon Valley Bank, which triggered a temporary peg dislocation before US federal regulators guaranteed all depositor balances.
Patrick Hansen, Director of EU Strategy and Policy at Circle, noted that tying stablecoin backing to commercial lenders subjects digital assets to bank solvency shocks. Consequently, Circle aligned its position with the European Central Bank, advocating for a liquidity-based framework instead of statutory deposit minimums.
Concentration limits and cross-border issuance structures
Beyond reserve liquidity requirements, regulatory scrutiny has also centered on issuer controls, including administrative freezes of USDC tokens and centralized redemption terms. Circle’s submission specifically targeted technical standards drafted by the European Banking Authority that introduce strict concentration thresholds.
Among those rules, Circle requested the removal of a 35% concentration cap on single-sovereign exposures. This cap prevents dollar-backed token issuers from holding their reserves predominantly in high-quality US Treasury securities, forcing them toward riskier commercial credit arrangements.
The company also opposed a separate technical standard capping deposits with a single institution at 1.5% of that commercial bank’s total assets. For large issuers, this ceiling necessitates maintaining reserve accounts across dozens of institutions, increasing counterparty monitoring burdens and administrative complexity.
Circle’s response further defended the preservation of multi-issuance models. This structure permits an EU-authorized entity and a foreign-regulated counterpart to co-issue a unified token, enabling global liquidity to flow transparently within the European Union’s regulated environment.
Circle highlighted that only three of the top 25 stablecoins by market cap comply with MiCA: USDC, EURC, and USDG. Restricting co-issuance arrangements could push European consumers toward unregulated offshore providers operating entirely outside European supervisory protections.
This regulatory divergence continues to fuel uncertainty surrounding the future of USDT in Europe, as competing issuers navigate compliance barriers and localized exchange delistings under MiCA enforcement deadlines.
Market feedback on derivatives and digital asset classification
Other industry participants filed recommendations before the consultation closed. The Hyperliquid Policy Center urged the European Commission to classify crypto perpetual futures under the second Markets in Financial Instruments Directive, advocating that public blockchain ledgers satisfy statutory audit and recordkeeping standards.
The Global Blockchain Business Council called for explicit redemption duties, enforceable reserve rebalancing, and clearer token categorization. The European Commission is scheduled to evaluate all stakeholder submissions and deliver its formal MiCA review assessment to the European Parliament in 2027.
This article is for informational purposes only and does not constitute financial advice.
