The European Banking Authority announced on October 14 that USDC issued by Circle Internet Financial Europe SAS is the European Union's first significant e-money token under the EU's Markets in Crypto-Assets Regulation (MiCA). The designation marks a new regulatory milestone among 45 e-money tokens notified under the regulation.
Starting November 12, the EBA will assume direct supervision of key financial safeguards for the EU issuer, while France's Autorité de Contrôle Prudentiel et de Résolution (ACPR) retains other oversight responsibilities.
Division of Supervisory Duties
From November 12, the EBA will take direct supervision of the EU issuer's regulatory capital, reserve assets, liquidity requirements, and recovery and redemption plans. The ACPR will continue supervising governance, qualifying holdings, fit-and-proper assessments, outsourcing arrangements, and conflicts of interest.
The EBA and ACPR will cooperate during the transition. Cross-border supervision is also part of the arrangement—the EBA signed a memorandum with the New York State Department of Financial Services to facilitate cooperation and information exchange on stablecoin activities.
Reserve Requirements and Circle's Policy Position
MiCA's existing framework requires credit institutions to keep at least 30% of funds received in exchange for e-money tokens in separate accounts, with the remainder invested in specified secure, low-risk and highly liquid instruments in the token's referenced currency. For significant e-money token issuers, the deposit floor rises to 60%.
In its October 1 consultation response to the European Commission, Circle argued for a different approach. The company recommends replacing mandatory minimum bank deposits with a more flexible minimum asset-liquidity requirement, contending that compulsory deposits increase exposure to banks' credit and counterparty risk. Circle also proposes removing a 35% cap on exposure to one sovereign and a banking-counterparty cap measured against 1.5% of a bank's total assets.
Global and European Reserve Structure
The EBA identifies separate USDC issuers for different regions: Circle Internet Financial Europe SAS for the EU and Circle Internet Financial, LLC for the US. Although USDC tokens issued by both entities are fungible, Circle describes reserves held separately by each entity for their respective holders.
In its consultation response, Circle asks European regulators to preserve multi-issuance arrangements and formalize safeguards, including dynamic rebalancing between global and EU-specific reserves.
The EBA announcement provides no new peg guarantee, insurance, or instruction to holders regarding fund movement or redemption terms. Circle's white paper notes that EU deposit-guarantee and investor-compensation coverage does not apply to USDC.
