The European Banking Authority (EBA) will take over supervision of key financial safeguards for EU-issued USDC on 12 November, after classifying the stablecoin as the European Union’s first significant e-money token under the Markets in Crypto-Assets Regulation (MiCA).
The EBA announced the designation on 14 October. USDC, issued in the EU by Circle Internet Financial Europe SAS, is the first of 45 e-money tokens notified under the bloc’s crypto rules to receive that status.
France’s Autorite de Controle Prudentiel et de Resolution (ACPR) will transfer responsibility for several areas to the EBA, while continuing to supervise other parts of the issuer’s operations.
From 12 November, the EBA will directly oversee the EU issuer’s own funds, or regulatory capital, along with its reserve of assets. It will also be responsible for liquidity requirements and recovery and redemption plans.
The ACPR will retain responsibility for governance, qualifying holdings and fit-and-proper assessments. Its remit will also continue to include outsourcing and conflicts of interest. The EBA said the two regulators would co-operate during the transition.
The division of responsibilities gives the European authority direct oversight of the financial protections supporting EU-issued USDC, while national supervision remains in place for other aspects of Circle’s business.
Under MiCA, the EBA supervises a significant e-money token issuer that is an electronic money institution for compliance with Articles 55 and 58. Those provisions set out requirements covering recovery and redemption planning, reserves, liquidity and own funds.
Article 54 requires credit institutions to keep at least 30% of funds received in exchange for e-money tokens in separate accounts. The rest must be invested in specified secure, low-risk and highly liquid instruments denominated in the currency referenced by the token.
Circle has argued that this framework should be changed. In its response to the European Commission’s MiCA review on 1 October, the company said mandatory minimum bank deposits could increase stablecoin issuers’ exposure to banks’ credit and counterparty risks.
It proposed replacing compulsory deposits with a more flexible minimum asset-liquidity requirement. Circle describes the current deposit floor as 30% of reserve assets for e-money token issuers and 60% for significant-token issuers.
The company also called for the removal of a 35% limit on exposure to a single sovereign and a banking-counterparty cap set at 1.5% of that bank’s total assets. Circle said the latter rule could force larger issuers to maintain relationships with dozens of banks.
The EBA distinguishes between Circle Internet Financial Europe SAS and Circle Internet Financial, LLC as separate USDC issuers. Circle’s white paper says the European entity holds reserves for European Economic Area holders, while the US entity holds reserves for non-EEA holders, although tokens from both issuers are fungible.
Circle has asked Europe to preserve multi-issuance and establish safeguards, including dynamic rebalancing between global and EU-specific reserves. It also signed a memorandum with the New York State Department of Financial Services to support cross-border co-operation and information exchange on stablecoin activities.
The EBA announcement does not provide a peg guarantee or new insurance, and does not instruct holders to move funds or automatically alter redemption terms. Circle’s white paper says EU deposit-guarantee and investor-compensation schemes do not cover USDC.
USDC was up 0.01% over the past 24 hours and ranked sixth by market capitalisation.
