Circle Pushes EU to Rethink MiCA Stablecoin Reserve Rules

Circle has formally asked the European Commission to overhaul the reserve requirements that govern stablecoin issuers under the Markets in Crypto-Assets Regulation (MiCA), arguing that mandatory bank-deposit minimums create the very credit and counterparty risks the rules were designed to prevent. For accounting firms, auditors, and CFOs holding or servicing stablecoin positions, the proposed changes have direct consequences for how reserves are classified, measured, and disclosed under both IFRS and US GAAP frameworks. Stablecoin accounting and reserve presentation are at the heart of the debate.

What Circle Is Asking the Commission to Change

Circle submitted its response to the European Commission's formal consultation on MiCA's review, which closed in early October 2026. The consultation invited market participants to assess whether MiCA remains fit for purpose as crypto markets mature, and the responses will feed directly into the Commission's legislative assessment.

The mandatory deposit minimums

Under the current MiCA framework, e-money token issuers must hold at least 30% of their reserves in commercial bank deposits. Issuers that cross the threshold to become "significant" face an even higher minimum of 60%. Circle wants both floors replaced with a flexible minimum asset liquidity requirement, one that would allow issuers to hold a broader range of high-quality liquid assets rather than concentrating exposure in bank deposits.

The company's argument is grounded in lived experience. In March 2023, Circle disclosed that approximately $3.3 billion of USDC reserves were held at Silicon Valley Bank at the time of that institution's failure. US authorities ultimately protected depositors, and the funds were recovered, but the episode illustrated precisely the counterparty risk that arises when a regulation pushes issuers toward bank deposits as a primary reserve instrument. Circle's position is that a liquidity-based standard, focused on asset quality and redemption capacity, would be more resilient than a deposit-concentration mandate.

Reserve concentration caps

Beyond the deposit floors, Circle is asking the Commission to remove two specific concentration limits. The first is a 35% cap on exposure to any single sovereign issuer within the reserve portfolio. The second is a ceiling on deposits held with any individual counterparty bank, set at 1.5% of that bank's total assets. Circle's submission argues these caps constrain the ability to build truly diversified, liquid reserve portfolios without adding meaningful safety.

Preserving multi-issuance structures

Circle also urged the Commission to maintain what it calls "multi-issuance," a structure under which an EU-authorised entity and a foreign-regulated co-issuer can jointly issue a stablecoin. The arrangement allows a single stablecoin to circulate globally while maintaining regulatory backing in multiple jurisdictions. Circle warned that restricting multi-issuance would drive users toward offshore providers that operate entirely outside MiCA's protections, an outcome that would reduce, not strengthen, consumer safeguards.

Other Respondents and the Broader Consultation Landscape

Circle was not alone in filing a response. The Hyperliquid Policy Center submitted comments urging the Commission to treat crypto perpetual futures under MiFID II, the EU's existing securities and derivatives framework, rather than creating a parallel MiCA-specific regime. Its submission also proposed tailored requirements for perpetual futures' market structure and called for recognition of public blockchain records as a valid means of meeting transparency and recordkeeping obligations.

The Global Blockchain Business Council's submission

The Global Blockchain Business Council called for clearer token classification, proportionate stablecoin safeguards, and a reduction in the regulatory duplication that currently exists between MiCA and the EU's payment-services rules. On cross-border stablecoin issuance specifically, GBBC pushed for clear redemption responsibilities, enforceable reserve rebalancing mechanisms, and an accountable EU supervisory framework capable of overseeing cross-border arrangements.

Taken together, the responses from multiple industry bodies suggest that MiCA's stablecoin provisions are among the most contested areas of the review, with concerns ranging from reserve composition rules to jurisdictional overlap and issuer structure.

Accounting and Reporting Implications for Firms

The current MiCA reserve rules already shape how stablecoin issuers and their corporate holders present reserves in financial statements. If Circle's proposals are adopted, those presentations may need to change.

IFRS treatment of stablecoin reserves

Under IFRS, the classification of reserve assets held by a stablecoin issuer depends on the nature of those assets. Bank deposits meeting the definition of cash or short-term highly liquid investments can qualify as cash equivalents under IAS 7. Government securities and other sovereign instruments held in the reserve portfolio are typically measured at fair value through profit or loss or at amortised cost, depending on the business model test under IFRS 9. A shift away from mandatory bank deposits toward a broader liquidity-based basket would require issuers and their auditors to reassess classification on an instrument-by-instrument basis. The removal of the single-sovereign concentration cap could also affect disclosures required under IFRS 7, particularly the concentration risk and liquidity risk sections of notes to the financial statements.

For IFRS crypto assets held by corporate treasury teams rather than by the issuer itself, the reserve rule changes matter indirectly. A stablecoin's credibility and price stability are partly a function of reserve quality; if the market interprets a reformed reserve framework as safer or riskier than the current one, fair value measurements and impairment assessments under IAS 36 and IFRS 9 may be affected.

USDC accounting under US GAAP

For US-listed or US-GAAP reporters holding USDC or EURC, the reserve composition debate connects to ASC 350-60, the FASB standard that requires most crypto assets to be measured at fair value with changes recognised in net income. USDC accounting under ASC 350-60 is relatively straightforward when the token trades at or very close to one dollar, but any sustained de-pegging event, of the kind that occurred briefly during the Silicon Valley Bank episode, creates a fair value measurement problem that auditors and preparers must address in real time. A reserve framework that reduces bank-deposit concentration risk could reduce the frequency and severity of such events, with downstream benefits for the volatility of fair value adjustments on corporate balance sheets.

The FASB's own crypto fair value standard, which came into effect for fiscal years beginning after 15 December 2024, already requires entities to measure crypto assets at fair value each reporting period. Firms holding stablecoins as treasury instruments need to document their fair value methodology, including how they determine whether a stablecoin's market price reflects its one-to-one peg or has deviated from it. Reserve rule changes that affect price stability are therefore directly relevant to that methodology.

Audit and disclosure considerations

For audit firms serving stablecoin issuers operating in the EU, the current MiCA reserve requirements create a relatively clear audit trail: verify that deposit balances meet the 30% or 60% floor, confirm that concentration limits are respected, and test completeness of the reserve pool. A principles-based liquidity requirement would demand a more judgement-intensive audit approach, one that assesses whether the chosen assets genuinely meet a liquidity standard rather than ticking a percentage box. Firms should anticipate that audit procedures for reserve compliance will become more bespoke and potentially more time-consuming if the Commission moves in the direction Circle is recommending.

Disclosure obligations will also shift. MiCA already requires issuers to publish reserve asset information; if the asset mix becomes more varied, disclosures will need to describe the liquidity criteria applied, the range of instruments held, and how the issuer satisfies itself that the reserve remains redeemable on demand.

What CFOs and Finance Teams Should Watch

The Commission's review is still at the consultation stage. No legislative proposal has been tabled, and the timeline for any formal amendment to MiCA's stablecoin provisions is uncertain. That said, finance and compliance teams should not treat this as a distant concern.

Near-term actions for B2B professionals

First, firms should review any stablecoin positions held on their balance sheet and document the current fair value methodology, including the source of pricing data and the frequency of the assessment. This is relevant regardless of how MiCA's reserve rules ultimately change, because it satisfies existing requirements under ASC 350-60 and IFRS 9 now.

Second, audit committees and CFOs at entities that issue or custody EU-regulated stablecoins should map their current reserve composition against both the existing MiCA minimums and the alternative liquidity-based framework that Circle is proposing. Understanding the gap between the two positions helps firms model how their compliance posture, and their financial statement disclosures, would change if the Commission adopts some or all of Circle's recommendations.

Third, firms with cross-border stablecoin arrangements that rely on multi-issuance structures need to monitor the Commission's stance on that specific point closely. If multi-issuance is restricted, the legal entity through which a stablecoin is issued may change, and that has implications for which set of accounting standards applies to the issuer's financial statements and which regulator has primary supervisory authority.

The MiCA review is part of a broader pattern of regulatory recalibration across the EU's crypto asset framework, and stablecoin accounting sits at the intersection of that regulatory evolution and the accounting standards work being done by both the IASB and FASB. Staying close to both tracks is the only way to avoid being caught out by a rule change that was visible on the horizon.

Frequently Asked Questions

What does MiCA currently require for stablecoin reserves?

MiCA requires e-money token issuers to hold at least 30% of their reserves in commercial bank deposits. Issuers classified as significant face a higher minimum of 60%. Additional concentration limits restrict exposure to any single sovereign to 35% of the reserve and cap deposits with any individual bank at 1.5% of that bank's total assets.

What is Circle proposing instead?

Circle wants the mandatory deposit minimums replaced with a flexible minimum asset liquidity requirement, allowing issuers to hold a broader range of high-quality liquid assets. It is also asking the Commission to remove the two concentration caps and to preserve multi-issuance structures that allow a stablecoin to be co-issued by an EU-authorised entity and a foreign-regulated partner.

How does this affect stablecoin accounting under IFRS?

If the reserve composition becomes more varied, issuers and their auditors will need to classify each instrument individually under IFRS 9 and IAS 7. Disclosures under IFRS 7 covering concentration risk and liquidity risk will also need to reflect the new mix of reserve assets. The change would make reserve audits more judgement-intensive and less formulaic.

How does it affect USDC accounting under US GAAP?

Under ASC 350-60, entities holding USDC measure it at fair value each reporting period. Any reserve reform that reduces the risk of a de-pegging event, such as the brief deviation seen during the Silicon Valley Bank episode in 2023, could reduce the frequency and magnitude of fair value adjustments on corporate balance sheets. Firms should document their fair value methodology in anticipation of auditor scrutiny.

When might these changes take effect?

The Commission's consultation closed in early October 2026. Responses will inform a legislative assessment, but no formal amendment to MiCA has been proposed yet. Any regulatory change would go through the EU's ordinary legislative procedure, which typically takes at least one to two years from a Commission proposal to final adoption. Finance and compliance teams should monitor the Commission's follow-up publications for timeline updates.

Source: Cointelegraph