Circle and Tether Agree on Something. Brussels Should Pay Attention.

A Rare Alignment

I did a double take when I saw Circle and Tether on the same side of a regulatory filing. These two have spent years fighting over the same liquidity, the same exchange listings, the same institutional mandates. Circle plays the compliance-first card. Tether plays the offshore and flexible card. They don't agree on much.

So when both of them tell the European Union that MiCA's bank reserve rules go too far, that's not noise. That's a signal about where the rulebook actually binds.

Here's what matters: the problem isn't MiCA itself. It's the technical standards sitting underneath it.

The Mechanics

MiCA passed in 2023, and the stablecoin provisions went live in mid-2024. The headline rules get the press. What's been squeezing issuers is the reserve requirement, which pushes a large share of backing assets into EU credit institutions with concentration limits that scatter the money across multiple banks.

Circle's near-term ask is straightforward. Loosen the bank deposit mandate so global issuers can hold reserves the way they already do everywhere else. Short-dated Treasuries, mostly. Repo. Cash at a handful of highly rated counterparties.

Its longer-term proposal is the one worth studying. Circle wants a recognition regime. That would require European Commission equivalence decisions and European Banking Authority recognition of a foreign issuer before that issuer could distribute through a locally licensed institution. In plain English, build two tracks. Comply locally if you want. Or get recognized as an equivalent regime and plug in.

The numbers tell the story. Tether's USDT floats around $120 billion in circulation. Circle's USDC sits somewhere in the $35 billion to $45 billion range. Every euro-denominated stablecoin combined is a rounding error next to either one. Forcing the dollar giants into EU bank deposits doesn't create euro demand. It just pushes issuance and liquidity outside the bloc.

What the Street Is Missing

Frankly, this is a competitive wound Europe gave itself. The bank deposit requirement looks prudent on paper. From a risk perspective, it concentrates exposure into a banking system that spent 2023 proving it can wobble. Treasuries trade in a $27 trillion market. EU bank deposits don't.

And the alignment between Circle and Tether tells you something else. When your two fiercest rivals write the same comment letter, the compliance cost stops being anyone's competitive edge. It's a tax on the whole category.

So here's the question worth asking. Is MiCA trying to regulate stablecoins, or is it trying to keep European bank deposits from walking out the door toward T-bills? Those aren't the same goal, and the rule design leans hard toward the second one.

My conviction sits with the recognition path. If the Commission opens equivalence and the EBA builds a workable issuer framework, dollar stablecoins stay on EU venues, euro liquidity deepens, and European fintechs keep the rails their customers already use. If it doesn't, expect more delistings and more issuance migrating to jurisdictions that never asked the question.

Circle and Tether won't agree often. On this, they're right. Watch the next MiCA review for any language on equivalence. If Brussels keeps the bank deposit mandate intact, I'd take the other side of the bet that EU stablecoin volume grows.