The European Banking Authority announced on Oct. 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 sets up a Nov. 12 transfer of key supervisory responsibilities from France’s financial regulator to the EBA.
The authority said USDC is the first token to receive that classification among 45 e-money tokens notified under the EU’s crypto regulation. France’s Autorité de Contrôle Prudentiel et de Résolution (ACPR) will retain other responsibilities.
The handover also gives fresh relevance to Circle’s earlier push to change the reserve framework. In its Oct. 1 consultation response, the company argued that rigid bank-deposit requirements can expose stablecoin issuers to banking-sector risk.
Supervision and reserve rules
From Nov. 12, the EBA will take over direct supervision of the EU issuer’s own funds, meaning regulatory capital. The EBA will also supervise its reserve of assets. The authority will oversee liquidity requirements and supervise recovery and redemption plans.
The ACPR will continue supervising governance and will retain supervision of qualifying holdings and fit-and-proper assessments, as well as oversight of outsourcing and conflicts of interest. The EBA said the two authorities will cooperate on the transition.
That allocation gives the European agency a direct role in the financial safeguards supporting EU-issued USDC, while national supervision continues over other aspects of the issuer’s operations.
MiCA’s legal framework assigns the EBA supervision of a significant e-money token issuer that is an electronic money institution for compliance with Articles 55 and 58. Those provisions cover recovery and redemption planning, as well as additional reserve, liquidity, and own-funds obligations.
The existing statutory baseline in Article 54 requires credit institutions to keep at least 30% of funds received in exchange for e-money tokens in separate accounts. The remainder must be invested in specified secure, low-risk and highly liquid instruments denominated in the token’s referenced currency.
Circle’s Oct. 1 response to the European Commission’s MiCA review seeks a different approach. It recommends replacing mandatory minimum bank deposits with a more flexible minimum asset-liquidity requirement, arguing that compulsory deposits increase exposure to banks’ credit and counterparty risk.
The company describes the deposit floor as 30% of reserve assets for e-money token issuers, rising to 60% for significant-token issuers.
Circle also recommends removing a 35% cap on exposure to one sovereign and a banking-counterparty cap measured against 1.5% of that bank’s total assets. It argues that the latter would require larger issuers to maintain relationships with dozens of banks.
USDC’s European issuer and global reserves
The EBA identifies separate USDC issuers in the EU and US: Circle Internet Financial Europe SAS and Circle Internet Financial, LLC. Circle’s USDC white paper likewise describes reserves held by the European entity for European Economic Area holders and by the US entity for non-EEA holders, even though tokens issued by the two are fungible.
A global USDC circulation figure does not describe the European issuer’s reserve portfolio. Circle’s consultation response asks Europe to preserve multi-issuance and formalize safeguards, including dynamic rebalancing between global and EU-specific reserves.
Cross-border supervision is also part of the EBA’s preparation. The authority said it signed a memorandum with the New York State Department of Financial Services to facilitate cooperation and information exchange on stablecoin activities.
The EBA announcement offers no peg guarantee or new insurance, and gives holders no instruction to move funds or automatically change redemption terms. Circle’s white paper excludes EU deposit-guarantee and investor-compensation coverage.
The dated change to watch is Nov. 12, when the specified supervisory responsibilities move to the EBA. Circle’s reserve proposals remain a separate policy debate.
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