Circle is pressing the European Union to rework parts of its crypto rulebook, arguing that the bloc's current approach to stablecoins has left the world's largest tokens outside its regulatory perimeter while binding their reserves too tightly to the banking system.

The stablecoin issuer, which issues the dollar-pegged USDC and the euro-pegged EURC, said Thursday that it had submitted a response to the European Commission's consultation on the review of the Markets in Crypto-Assets Regulation (MiCA), the bloc's comprehensive framework for digital assets. MiCA's stablecoin-specific provisions began applying in June 2024, with the full regime in force since the end of that year. Circle framed its recommendations as refinements to a regime it credits with giving Europe an early lead on stablecoin oversight.

The company's central argument is that MiCA has produced plenty of regulated issuers while failing to capture the largest global tokens. Of the top 25 stablecoins by market value, Circle noted, only three are MiCA-regulated. That gap, Circle argued, blunts the effectiveness of a framework that otherwise gave Europe an early regulatory lead.

To close that gap, Circle urged the Commission to preserve "multi-issuance" — the structure that allows a globally circulating stablecoin to be co-issued by an EU-authorized entity alongside its foreign-regulated counterpart, an arrangement Circle said is essential to bringing globally circulating tokens within the EU framework. Restricting it, the company warned, would simply push activity offshore.

Reserve requirements drew Circle's most pointed requests. Reserves are the assets a stablecoin issuer holds to back its tokens and honor holder redemptions, and under MiCA, e-money token issuers must hold at least 30% of reserves in commercial bank deposits, a threshold that rises to 60% for tokens deemed "significant" — a designation triggered by scale measures such as holder numbers and market value. Circle argued the mandate actually increases exposure to banking-sector credit risk, and sided with the European Central Bank in calling for it to be replaced with a more flexible liquidity requirement.

The firm also asked regulators to scrap a 35% cap on single-sovereign exposure and a rule limiting how much a stablecoin issuer can hold at any one bank — restrictions it said would force large issuers to spread reserves across dozens of institutions.

The submission lands as Brussels prepares a broader overhaul of the framework. The EU is expected to revise MiCA in 2027 to better address foreign stablecoin issuers, even as European crypto firms navigate the squeeze of the regime's transition period and regulators press platforms such as Binance over compliance. Feedback gathered through the consultation is expected to inform the Commission's assessment of the framework, and any adjustments to the reserve rules would follow the EU's legislative process.

The push also reflects a wider contest over stablecoin dominance, as U.S. issuers abroad and Washington increasingly frames dollar-pegged tokens as a tool to extend the greenback's global reach.

Source: Decrypt