Circle and Tether, the two largest stablecoin issuers in the world, are pushing back against a key part of Europe’s crypto rulebook. Both companies want regulators to revise how the Markets in Crypto-Assets Regulation, known as MiCA, handles reserve requirements for stablecoins.
According to reporting by CryptoSlate, Circle and Tether have found rare common ground in opposing MiCA’s bank-focused reserve rules. The two companies are usually rivals, but both see this specific provision as a shared problem. For related coverage, see What Is a Stablecoin? Peg, Reserves, Redemption, and How They Work.
What MiCA Requires, and Why Issuers Object
MiCA, the European Union’s framework for regulating crypto assets, includes rules that require issuers of significant stablecoins to hold a portion of their reserves in regulated bank deposits. The goal is to protect consumers by ensuring issuers can honor redemptions. For related coverage, see OKX, ICE Seek SEC Approval for 63 Tokenized U.S. Stocks.
The concern from issuers is that placing large portions of reserves in bank accounts concentrates risk rather than spreading it. If a bank holding those reserves were to fail, the stablecoin issuer, and by extension its users, could face serious problems. To understand how stablecoin reserves and redemptions work, the mechanics matter: an issuer must be able to swap every stablecoin token for its underlying currency on demand. For related coverage, see El Salvador's Sivar App Plans Dollar-Backed Stablecoin Remittances.
The European Securities and Markets Authority (ESMA) has published guidelines under MiCA that set the framework for how these requirements are applied in practice. Circle and Tether want those requirements revised before they create compliance bottlenecks or market-access barriers. For related coverage, see Crypto Tax Extension Deadline Oct. 15: What Investors Need to Know.
What a Rule Change Could Mean for the European Market
If regulators accept the issuers’ argument, the result could be more flexibility in how stablecoin reserves are structured, possibly allowing a greater share to be held in government bonds or other low-risk instruments instead of bank deposits. That would bring European rules closer to how both Circle and Tether currently manage their global reserves.
If regulators hold firm, issuers operating in Europe face a choice: restructure reserves to meet MiCA’s specific requirements, limit their European operations, or exit the market. OKX’s decision to open a USDT-to-USDC conversion route in Europe as MiCA rules tightened shows that exchanges are already adjusting their product offerings in response to the regulatory pressure.
The outcome of this lobbying effort is not yet decided. Circle and Tether are advocating for change, but European regulators have not signaled whether they will revise the reserve provisions. For anyone holding or considering stablecoins in Europe, the key question is whether the two largest issuers can access the market on terms they find viable. That question will likely be answered as MiCA’s stablecoin provisions are fully enforced and tested over the coming months.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.
