A report on October 14 said the European Banking Authority had designated Circle’s USDC the EU’s first “significant” e-money token under MiCA, with oversight of specified areas set to begin November 12. The change would bring closer scrutiny of USDC’s reserves and redemption planning. Circle is urging EU policymakers to reconsider some of the rules tied to the classification.
- The reported EBA remit covers reserves, capital, liquidity and recovery and redemption plans.
- MiCA imposes stricter requirements on tokens classified as significant.
- Circle says partner payments and reinvestment help make USDC usable.
- Circle’s expansion plans face competition and unanswered questions about execution.
What “significant” means under MiCA
MiCA, the EU’s Markets in Crypto-Assets regulation, classifies stablecoins tied to a single official currency as e-money tokens, or EMTs. An EMT can be designated significant if it meets at least three of seven criteria. These include having more than 10 million holders, a value above €5 billion, or an average daily transaction count above 2.5 million and an aggregate value above €500 million during the relevant period.
The reported information does not say which criteria USDC met. The material available here also does not include the EBA’s formal decision. The exact terms and division of supervisory responsibilities should be confirmed against the regulator’s notice.
According to the reported arrangement, the EBA is due to take over supervision of specified matters from France’s banking regulator, the ACPR, on November 12. These include reserves, capital, liquidity and recovery and redemption plans. The ACPR is expected to keep oversight of other aspects of Circle Internet Financial Europe SAS, Circle’s France-based subsidiary involved in issuing USDC for EU use. That would divide responsibilities, not transfer supervision of the French entity wholesale.
The reserve rules also need to be described precisely. Under MiCA, significant EMT issuers must deposit at least 60% of the funds received in exchange for tokens in separate accounts at credit institutions. The threshold for other EMT issuers is 30%. The remaining reserve assets face separate requirements, including restrictions on eligible investments. That is more specific than saying issuers must simply hold “cash at EU banks.”
Significant issuers must also hold own funds equal to at least 3% of the average amount of reserve assets, compared with 2% for other issuers. This is a regulatory capital requirement, not a requirement to keep that percentage of every token’s backing in cash. Significant issuers can also face higher penalties for MiCA infringements.
Circle argues the reserve rules are too rigid
In a response submitted to the European Commission’s MiCA review consultation on October 1, Circle asked for the significant-token reserve rules to be “reconsidered and replaced with a less rigid minimum asset liquidity requirement.” The details of the proposed standard, and whether the Commission will accept it, remain unclear.
Circle’s argument points to a real trade-off. Prescriptive rules can make reserves easier to supervise and help ensure issuers can meet redemptions. But strict limits on reserve composition can also constrain how an issuer manages its assets. A liquidity-based approach might allow more flexibility. It would need clear definitions and effective enforcement to protect token holders just as well.
The debate also has a broader monetary dimension. European officials, including the European Central Bank, have raised concerns that dollar-backed stablecoins could weaken the EU’s monetary sovereignty. Yet the market figures cited in the reporting show how small euro-denominated alternatives remain: euro-backed stablecoins were valued at about $900 million combined, less than 0.3% of the overall stablecoin market. No measurement date was given, so these figures should be treated as a snapshot, not a current market comparison. Circle’s EURC faces competition in Europe as those alternatives develop.
Circle defends the cost of distributing USDC
Regulation is not Circle’s only pressure point. On October 16, Circle chief commercial officer Kash Razzaghi defended the company’s spending on partners that help distribute USDC. Competing stablecoin projects, meanwhile, are promoting ways to share more revenue with partners. The Reuters report also covered Circle’s expansion plans.
Circle reported $1.4 billion in first-half revenue and $819 million in “distribution and transaction costs.” That works out to about 58.5% of reported revenue, or roughly 59%. The accounting category should not be read as partner payments alone. The figures provided do not show how the costs were allocated or what they include.
Razzaghi said Circle reinvests 34 cents of every revenue dollar and keeps 7 cents as net income. Those are his descriptions of the company’s economics, not an independent breakdown. Together with the roughly 59% cost figure, the amounts add up to 100 cents. The available details do not explain the accounting basis or whether the categories align precisely.
“The majority of USDC’s economics” has been shared “with the partners that drive its adoption, ” Razzaghi said.
His argument is that a stablecoin needs more than a dollar peg. It also needs distribution, operational support and reliable redemption. That is fair. But partner spending is a commercial choice, and users and partners need enough disclosure to judge whether USDC’s services justify the cost.
Razzaghi said Circle redeemed $71.8 billion in USDC in the first quarter, which he described as roughly 90% of the supply then in circulation. He also said Circle customers could redeem for free through standard rails, with settlement in up to two business days. These are claims from a Circle executive. He did not provide the calculation behind the comparison with circulating supply.
Expansion plans, with figures still unclear
Circle CEO Jeremy Allaire told Reuters that the company planned to expand in emerging and developing economies across Latin America, the Middle East and Southeast Asia. Reports give different figures for the scale of the plan: one account describes about 50 economies, while a Reuters report’s headline refers to 40 new markets. The figures may cover different scopes, but that distinction has not been established.
Circle has announced a partnership with SAP-backed financial-services company Tereina to integrate USDC and its euro-backed stablecoin EURC into payment infrastructure, starting with SAP Cloud ERP. The arrangement could give Circle a route into business payment workflows. But an announced integration does not show that it has generated meaningful transaction volume or adoption.
Circle also acquired Singapore-based cross-border payments firm Tazapay. Tazapay was described as processing 60% of its $25 billion annual volume in stablecoins. That points to an existing use for stablecoins in cross-border payments, but the details provided do not show how much of that activity will involve USDC or what the acquisition will add to Circle’s business.
Tether’s USDT remains the market-leading stablecoin, and Tether has focused on emerging and developing economies. Circle’s plans put it in direct competition for users and payment flows in markets where access to banking, local regulation and dependable redemption infrastructure can matter as much as the token itself. Circle has described the industry as moving toward mainstream adoption. Whether new partnerships and market entries lead to lasting use remains to be seen.
Key questions about USDC and MiCA
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When is the EBA expected to begin supervising specified USDC matters?
The reported start date is November 12. The EBA’s formal notice is needed to confirm the exact scope and supervisory arrangements. The European Banking Authority’s announcements are the relevant source for official updates.
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Do USDC holders need to take action?
No action for users is specified in the reported designation. The available information does not indicate a change to redemption access or terms for holders.
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What does the significant classification change?
It brings stricter reserve and capital requirements and, according to the reported arrangement, EBA oversight of specified areas, including liquidity and redemption planning. Reporting also describes a shift in USDC’s EU reserves and capital supervision.
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Why does Circle want different reserve rules?
Circle says the rules are too rigid and has proposed a minimum asset-liquidity requirement instead. The proposal’s details and its prospects with EU policymakers remain unclear.
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How much does Circle spend on distribution and transaction costs?
Circle reported $819 million for the first half, about 59% of its $1.4 billion in revenue. The figures do not show how much went directly to partners or how the company calculates its other per-dollar claims.
The next concrete test is the EBA’s formal notice. It should clarify which responsibilities move to the EU level, how the reserve rules apply and what USDC users should expect. Until then, the designation is a significant regulatory signal, but its practical consequences should not be guessed from the label alone. Circle’s USDC has also reached $8 billion on Solana amid MiCA-related attention.
