European Union flags outside the European Commission building in Brussels

Circle Wants MiCA to Trade Bank-Deposit Quotas for a Liquidity Test

By Isaac • October 2, 2026 11:22 am • Comments

Circle is asking European regulators to rethink one of MiCA’s most concrete stablecoin rules: the share of reserves that issuers must keep as commercial bank deposits.

The USDC and EURC issuer says the requirement is meant to promote safety, but can concentrate the very bank and counterparty risks that a reserve framework should reduce. Its alternative is a broader liquidity test that focuses on whether assets can meet redemptions under stress.

In its formal response to the European Commission’s MiCA review, Circle said the regulation currently requires e-money token issuers to place at least 30% of reserves in commercial bank deposits. The floor rises to 60% for tokens classified as significant.

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Circle argues that a rigid deposit quota increases exposure to bank credit and counterparty failures. It supports replacing that formula with a minimum liquidity requirement that accounts for the quality and liquidity of high-quality liquid assets.

The company also wants two concentration rules removed. One limits exposure to a single sovereign to 35%, while another caps deposits with one banking counterparty at 1.5% of that bank’s total assets.

Circle says those limits can force a large issuer to spread reserves across dozens of banks and prevent a dollar-backed token from holding mostly U.S. sovereign assets. The practical question is whether diversification by rule actually improves resilience when it also adds more counterparties and operational complexity.

Reserve rules are only one part of Circle’s request. The company also wants Europe to preserve multi-issuance, the structure that lets a globally circulating stablecoin be co-issued by a MiCA-authorized European entity and a regulated affiliate outside the bloc.

Circle says that model keeps global liquidity inside MiCA’s protections instead of pushing European users toward offshore access. It also proposes a longer-term equivalence and recognition system for foreign-regulated stablecoins, similar to structures already used in other areas of financial regulation.

The market gap behind that argument is significant. Circle says Europe now has roughly 30 authorized e-money tokens, yet only three of the world’s top 25 stablecoins by market capitalization are MiCA-regulated: USDC, USDG and EURC.

Cointelegraph noted that Circle’s objection carries some history. USDC temporarily lost its dollar peg in March 2023 after the company disclosed that $3.3 billion of its reserves were held at Silicon Valley Bank when that institution failed.

That episode cannot dictate Europe’s final rulebook. It does show why bank concentration is a concrete concern for the issuer: cash at a commercial bank can be liquid in ordinary conditions and still become inaccessible at exactly the wrong moment.

MiCA’s review is a consultation, not a final change in law. The European Commission can accept, reject or reshape the industry’s recommendations, and any legislative revision would take time.

Still, Circle has framed a sharp policy tradeoff. Europe can measure safety by fixed buckets, or it can judge the reserve portfolio by how well it survives redemptions and counterparty stress.

For stablecoin holders, the distinction reaches straight into the reserve account. It determines where the money backing a token sits when the banking system itself becomes the source of risk.

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