On October 1st, Circle made public its review and consultation opinions on the 'Regulations on Crypto Asset Markets' submitted to the European Commission. As the issuer of USDC and EURC, it proposed to maintain the channels for jointly issuing stablecoins in multiple regions and to reconsider the reserve requirements for electronic currency tokens. This action is a response by the enterprise to the policy consultation requests, not an indication that the EU has adopted these proposals, nor does it mean that there were any changes to the regulations on that day. For the stablecoin market, the significance of this document lies in bringing up two of the most important concerns for issuers: whether global liquidity can be ensured in compliance with European regulations, and how reserve assets can meet both security and operational efficiency requirements simultaneously.
According to Circle, there are approximately 30 electronic currency tokens authorized under the MiCA framework, but among the top 25 stablecoins by global market value, only USDC, USDG, and EURC are regulated by MiCA. This comparison was made by Circle in a policy document, reflecting their assessment of the market boundaries, rather than an official declaration by the European Union that the framework has failed. The number of authorized tokens does not equate to actual trading volume: even a compliant token may have limited scale if it lacks wallets, trading platforms, and merchant adoption.
Issued jointly in multiple locations, the competition is for a legal entry point into global liquidity.
Stablecoins are typically circulated in multiple markets, but different countries have varying requirements for issuers and reserves. Circle proposes to maintain a so-called multi-regional co-issuance arrangement: EU entities authorized by MiCA would work together with overseas regulated affiliated entities to serve the same globally circulated tokens. It argues that without such a structure, some users might still obtain the same asset outside of EU regulatory jurisdiction, making consumer protection even more difficult to achieve. This is the issuer's policy stance and does not necessarily represent the risk assessment agreed upon by all regulators.
The difficulty in co-issuing tokens lies in the fact that responsibilities cannot be merely stated in marketing materials. Who will be responsible for redeeming tokens held by users within the European Union? How should reserves be allocated across different jurisdictions, and can funds be promptly reallocated in the event of a centralized redemption? Are regulatory authorities able to inspect the assets and records of cross-border entities? Circle suggests institutionalizing measures to dynamically balance global and EU reserves, but the specific mechanisms still need to be reviewed by regulators. Without clear asset isolation and redemption responsibilities, so-called “global liquidity” could also become a channel for the cross-border transmission of risks.
Circle also proposes a longer-term 'equivalence and recognition' system: first, it is determined whether the regulatory systems abroad meet acceptable standards, then the European level makes recognition of specific issuers, and distribution is carried out through local licensed institutions. This is not the same as the current issuance arrangements in many places. The former is a set of institutional concepts that are yet to be discussed, while the latter is the existing market channel that Circle hopes to maintain. If reports describe this concept as an EU-approved cross-border license, it could lead readers to misinterpret the legal status of stablecoins in Europe.
The debate over such regulations also involves competition. Overseas issuers hope to maintain their scale and liquidity, while local European issuers may prefer stronger local regulation and market space. To find a balance between innovation and user protection, it is necessary to compare factors such as redemption rights, transparency of reserves, crisis management, and cross-border regulatory cooperation, rather than focusing solely on the issuance scale of a single company.
How to allocate reserves determines where the risks will fall.
Another key recommendation Circle relates to reserves. It states that MiCA currently requires cryptocurrency token issuers to keep at least 30% of their reserves in commercial bank deposits; for issuers identified as important tokens, this ratio is increased to 60%. Circle believes that mandatory deposit ratios may increase dependence on bank credit and counterparties, and suggests shifting to more flexible minimum asset liquidity requirements. This is not a call to abolish reserves, but rather a proposition to change the rules regarding where reserves must be kept.
The safer the reserves, the easier it is to liquidate them, and the more likely holders are to redeem them at face value during times of pressure. However, asset security cannot be summarized simply by terms like "bank deposits" or "government bonds": deposits carry bank risks, securities have price and liquidity risks, and concentrated holdings can also expose one to a single counterparty risk. Circle also calls for adjustments to the technical standards set by the European Banking Authority regarding the maximum concentration of sovereign debt, as well as the maximum proportion of single bank deposits in a bank's total assets. It argues that current restrictions make the arrangements for dollar token reserves even more complex. These opinions must be subject to independent assessments by regulatory authorities regarding systemic risks and consumer protection.
For ordinary users, the details of the policy ultimately boil down to tangible issues: whether they can be redeemed at face value, how long it takes to redeem, whether reserves are isolated in the event of the issuer's bankruptcy, and whether cross-border transfers are restricted. While stablecoins can be transferred quickly on-chain, the entry and exit of fiat currency, redemption processes, and legal rights are still determined by off-chain systems. Focusing only on the speed of on-chain transactions while ignoring reserve rules can easily lead to an underestimation of the real sources of risk.
The consultation response of Circle demonstrates the issuer's demands for the next phase of the European market. It is not a regulatory document, nor does it alter the existing obligations of MiCA. Moving forward, attention should be paid to the review results of the European Commission, the opinions of other issuers and consumer organizations, as well as how the final text will handle overseas tokens, redemptions, and reserves. What can be confirmed now is that the opinions have been submitted and made public; whether the rules will change still depends on subsequent legislative and regulatory procedures.
