Circle Urges EU to Keep Global USDC Issuance Under MiCA

Global USDC issuance faces cross-border redemption questions

The European Systemic Risk Board’s 2025 recommendation defines the model as EU and overseas issuers creating interchangeable tokens with reserves divided between jurisdictions. Fungibility means tokens can be exchanged as equivalent units even when the issuers operate under different rules.

The ESRB recommended that the Commission treat these schemes as impermissible under the existing framework. If the Commission took another view, it recommended a dedicated safeguards regime. That is a supervisory policy position, distinct from a new ban enacted by lawmakers.

Its proposed safeguards include assessing overseas regulatory equivalence, international supervisory cooperation and obstacles to moving reserve assets. It also calls for evidence that supporting institutions can sell assets, transfer funds across borders and maintain payment-system access promptly.

The practical question is whether an EU redemption obligation can be met when some backing sits elsewhere. A reserve asset’s stated value and the ability to deliver cash from another jurisdiction are different tests.

The ESCB’s September 2026 response maintains those concerns. It says authorities face difficulties identifying how many tokens are held in the EU and whether local reserves match local liabilities, while differing overseas standards can complicate supervision.

The central banks favor legal clarification and, if such schemes are permitted, an equivalence framework and additional protections. Suggested measures include adequate EU liquidity buffers, aligned stress testing and coordinated recovery and redemption plans.

This is a different question from the ECB’s proposal to replace mandatory bank placements. Agreement on reserve flexibility does not establish agreement on cross-border issuance.

MiCA’s 30% deposit floor remains in force

Under MiCA Article 54, at least 30% of funds received for ordinary e-money tokens must remain in separate accounts at credit institutions. The balance must be invested in low-risk, highly liquid instruments denominated in the token’s reference currency.

That provision concerns the composition of backing assets. It does not describe a 30% haircut on customers’ tokens, a trading tax or the amount holders can withdraw. A deposit floor specifies where part of the reserve sits, rather than how much each token is worth.

The ESCB proposes replacing mandatory deposits with minimum reserve shares available within one and five working days. Its response also identifies the higher 60% deposit requirement for significant tokens. These are regulatory categories, not percentages of all global USDC reserves automatically subject to Europe.

Circle supports reconsidering deposit floors and proposes removing two reserve-concentration limits. Separately, it advocates a longer-term recognition framework for foreign-regulated issuers, with EU-level assessment and local licensed distribution.

Bank exposure has a documented precedent. In Circle’s March 2023 SVB update, the company reported $3.3 billion at Silicon Valley Bank, about 8% of USDC’s backing. It said the funds would become available following the U.S. authorities’ decision to protect depositors.

The same update described a reserve split of 77% short-dated U.S. Treasury bills and 23% cash at that time, alongside new banking arrangements for minting and redemption. Those are historical figures, not a current portfolio breakdown.

The episode illustrates an operational distinction: holding sufficient assets does not guarantee uninterrupted access to a particular bank. Europe’s reserve debate addresses that dependency, while cross-border supervision introduces an additional layer.

Access to banking rails remains relevant beyond Europe, as Standard Chartered’s institutional USDC minting service illustrates. Operational distribution and permission to issue a token are separate parts of the system.

EU stablecoin review leaves licensing and yield rules intact

The Commission’s consultation opened May 20 and closed September 30 at 23:59 CEST. The October 1 date on Circle’s publication does not independently establish when its response was filed.

The Commission says responses will inform its report on MiCA’s application and market developments. A legislative proposal may accompany that report if warranted. Closing the questionnaire did not itself rewrite the regulation or supply an implementation date.

Issuer authorization remains another independent requirement. Commission guidance published by ESMA says stablecoins offered publicly or admitted to trading in the EU need an authorized issuer, subject to applicable transitional provisions. It also addresses offers by intermediaries, rather than treating distribution through another company as an exemption.

For a trading platform, a reform of reserve percentages would therefore leave a second question: whether the issuer and the proposed activity meet the authorization rules. The existing guidance specifically treats an operator’s listing of an unauthorized issuer’s token as seeking admission to trading on its own initiative.

Article 50’s interest prohibition also remains a separate constraint. It bars issuers and crypto service providers from granting interest related to e-money tokens, including certain benefits linked to holding duration.

Reserve income consequently should not be confused with a promised return for token holders. Changing where reserves are held would not, by itself, create permission to offer stablecoin yield or reverse a provider’s restrictions, such as Revolut’s reported USDT withdrawal timetable.

Broader sentiment remained positive: Alternative.me’s Bitcoin-focused Fear and Greed Index read 67, or Greed, for October 3, compared with 72 the day before. It measures market sentiment, not support for regulatory reform.

The next substantive signal is the Commission’s treatment of cross-border issuance and reserve safeguards in its review report or any accompanying proposal. The reviewed consultation page does not establish an amendment date, and the scope of any eventual changes remains unresolved.