The EU Named USDC Its First 'Significant' Stablecoin. The Label Doubles the Reserve Share That Must Sit in Banks

What Happened

The European Banking Authority (EBA) announced on Wednesday, October 14, that it has classified USDC, issued in the European Union by Circle Internet Financial Europe SAS, as a significant e-money token under the Markets in Crypto-Assets Regulation (MiCA). It is the first among the 45 e-money tokens notified under MiCA.

On Thursday, November 12, direct supervision of the issuer's own funds, reserve of assets, liquidity requirements, and recovery and redemption plans passes from France's Autorité de Contrôle Prudentiel et de Résolution (ACPR), which licensed Circle's French entity in July 2024, to the EBA.

The ACPR keeps governance, qualifying holdings, fit-and-proper assessments, outsourcing, and conflicts of interest. The 2 supervisors, the EBA said, 'will work closely together to ensure a smooth transition and effective supervisory cooperation.'

The release does not say which tests the token passed. Article 56 of MiCA directs the EBA to classify an e-money token as significant when at least 3 of the 7 criteria in Article 43 are met, among them more than 10 million holders, more than €5 billion issued or in reserve, and more than 2.

5 million transactions and €500 million a day. Where several issuers issue the same token, the data are aggregated, which is the clause that matters here: Circle's MiCA white paper put USDC outstanding at 73.0 billion as of September 6, most of it issued by the US entity, while the French entity's reserve covers only what circulates in the European Economic Area, a figure neither Circle nor the EBA has published.

The EBA said it will reassess the classification every year and pointed to its information-sharing agreement with the New York State Department of Financial Services. As of this writing, Circle has not published a statement.

The first token the EU called significant is the first it will hold to a rule the ECB, the issuer, and the issuer's rival have all asked it to delete. Until 2027, the label and the floor travel together.

What the Label Switches On

The label is not a license, a ban, or a cap. It is a different rulebook. Under Article 58, an electronic money institution that issues a significant token follows MiCA's reserve and own-funds articles instead of the E-Money Directive's safeguarding and capital rules. In numbers: own funds of at least 3% of the average reserve instead of 2%; an independent audit of the reserve every 6 months from the date of the decision; a liquidity management policy and stress tests; and a supervisory college chaired by the EBA, with the ACPR, the European Securities and Markets Authority (ESMA), and the supervisors of the main custodians, venues, and payment providers, within 30 calendar days.

The number that moves the most is the deposit floor. Article 54 already requires every e-money token issuer to keep at least 30% of the funds it receives in separate accounts at credit institutions. For a significant token, Articles 36(4) and 45(7) set the floor the EBA's technical standards cannot go below at 60%.

The standard itself is in limbo: the EBA sent its draft in June 2024, the Commission proposed amendments in August 2025, and the EBA objected that October that they 'would materially alter the prudential framework.' No adopted text has appeared, so when and how the 60% binds its first issuer is the EBA's to settle after November 12.

A separate ceiling is already live and was not invoked: Article 58(3) applies Article 23 to any token referencing a non-EU currency, and if USDC's use as a means of exchange inside the euro area exceeds 1 million transactions and €200 million a day, Circle must stop issuing. The label is about who watches the reserve, not how much of the token Europe may use.

The Floor Nobody on Record Defends

The floor was written to keep stablecoin money inside the supervised banking system; the people who live under it say it does the opposite. Circle filed its response to the European Commission's MiCA review on Thursday, October 1, the day after the consultation closed. Per The Block's account, it asks the Commission to replace the 30% and 60% minimums with a 'less rigid minimum asset liquidity requirement,' to drop a 35% cap on any single sovereign that it says makes it 'impossible' for a dollar token to hold mostly US Treasuries, and to drop a 1.

5%-of-bank-assets limit that would force a large issuer into 'dozens of separate banks.' Its evidence is its own history: on Friday, March 10, 2023, Circle disclosed that $3.3 billion of USDC's roughly $40 billion reserve sat at Silicon Valley Bank, closed that day, and USDC traded near $0.

90 until federal authorities guaranteed the bank's deposits on Sunday, March 12, 2023. Tether's Paolo Ardoino called the 60% rule a 'systemic risk' in August 2024, since deposit insurance of €100,000 per depositor is a rounding error against a reserve in the billions; Tether never applied, and USDT left regulated EU venues on July 1.

The third voice is the one that counts. On Tuesday, September 22, the European Central Bank and the 27 national central banks asked the Commission to delete the deposit rule and judge reserves by maturity instead, warning that a run on a token would pull the same money out of the banks at the same moment.

The floor has a case. A bank deposit is the only reserve asset that converts to cash at par the same day without a market; a Treasury bill carries a price, and in March 2020 even that market needed the Federal Reserve to function. The 1.5% concentration limit Circle wants gone exists to stop 1 bank from holding a position like SVB's, which was about 8% of the reserve.

And an issuer that earns the yield on bills has a reason to prefer them. The argument is about where the risk sits, not whether it exists: a reserve of deposits fails when a bank fails, a reserve of bills fails when a market freezes, and the holder is consulted in neither design.

The rule the EU's banking supervisor will now enforce on its first significant token is one the EU's central bank, the token's issuer, and its largest competitor have all asked it to remove. The Commission's proposal is expected in 2027.

What This Means for You

Count the claims. A USDC in your wallet is a claim on Circle's French entity. That entity's reserve is a set of claims on banks (deposits) and on governments (bills). The holder's claim is redeemable at par under Article 49, is not covered by any deposit guarantee scheme, and can be frozen by the issuer, as the archive has documented for Tether twice since September.

What the label changes is the mix of the second layer, and the regulator sets that mix without asking the first. A reader in the EU who holds USDC because USDT is gone from licensed venues now holds the largest dollar token left on them under a rule that moves more of its backing into uninsured bank balances.

That is custodial risk 2 steps removed.

Self-custody fixes less here than it usually does. Moving USDC off an exchange and onto a hardware wallet under your own private keys removes 1 claim from the stack, the exchange's. It does nothing to the reserve: the issuer's freeze authority survives, and the deposit share is whatever Article 58 and the EBA say it is.

Key control over a stablecoin is custody of a claim. That is still worth having, because an exchange balance is a claim on the exchange, on a claim on Circle, on a claim on a bank, and each layer has its own clock. The move is to shorten the stack, not to mistake a short stack for ownership.

Practical steps follow. Read the reserve attestation for the deposit share, the bank names, and the maturity of the rest; Circle publishes monthly attestations, and the European Economic Area reserve is the one to watch after November 12. Size stablecoin holdings as working capital, not as savings.

For anything held longer, the asset with no reserve to compose and no issuer to freeze it is bitcoin on your own keys. Outside the EU the lesson transfers: the GENIUS Act gives US issuers a different menu (cash, insured demand deposits, bills of 93 days or less, repos, government money market funds) and no deposit floor, and that menu is also a policy choice made in an office you do not sit in.

The par of a stablecoin is a decision about which failure the regulator would rather explain.

What to Watch

November 12 is the first checkpoint: whether the EBA publishes which criteria USDC met and a figure for the EEA reserve. The liquidity standard is the second: the Commission's amended text decides when the 60% binds and in what form. Watch Circle's EEA reserve attestations for the deposit share and the bank list.

The Commission's 2027 MiCA review proposal will show whether the objection the ECB, Circle, and Tether now share becomes law or stays a filing. Any Article 23 finding on USDC's use as a means of exchange in the euro area would be a larger event than a change of supervisor. And a second significance decision, for Circle's euro token EURC or another dollar token, would show whether the first was about USDC or about the category.

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