Circle, the issuer of the USDC stablecoin, is pushing for an overhaul of the European Union's Markets in Crypto-Assets regulation (MiCA) after finding that only 3 of the top 30 stablecoins by market capitalization currently meet the bloc's rules.

The figure underscores a widening gap between the EU's regulatory framework, which took full effect for stablecoin issuers in mid-2024, and the operational reality of a market still dominated by tokens that have not secured the required authorization. MiCA's stablecoin provisions require issuers of asset-referenced tokens and e-money tokens to be licensed in a member state, hold adequate reserves, and meet redemption and disclosure obligations.

Circle occupies an unusual position in this debate. The company secured an Electronic Money Institution license from France's Autorité de Contrôle Prudentiel et de Résolution (ACPR) ahead of MiCA's application and has since used that authorization to passport its services across the European Economic Area. Its flagship token, USDC, ranks among the small group of large-cap stablecoins that comply with the regime.

A market out of compliance

The compliance gap Circle highlights has concrete consequences for market structure. Stablecoins that fail to obtain MiCA authorization cannot be lawfully issued or marketed in the EU, which has already pushed some trading venues and service providers to delist non-compliant tokens for European users. The result is a two-tier market: a handful of authorized tokens competing for EU liquidity while the largest dollar-pegged assets remain effectively off-limits to European retail flows.

For issuers, the operational burden is substantial. MiCA demands reserve backing of at least 60% in EU-based deposits for interest-bearing-adjacent e-money tokens, quarterly disclosures, and redemption at par within defined timelines. Meeting those requirements typically means establishing a licensed EU entity, restructuring custody arrangements, and building reporting infrastructure — costs that smaller issuers may struggle to absorb.

Circle's call for an overhaul suggests the company believes the current framework is not working as intended. A regime that leaves 27 of the 30 largest stablecoins outside the authorized perimeter does little to protect European users, who can still access non-compliant tokens through decentralized exchanges and offshore venues beyond the reach of EU supervisors.

Business implications

The compliance shortfall carries uneven commercial consequences. Authorized issuers such as Circle gain a regulatory moat in Europe, where banks, fintechs, and corporates evaluating stablecoin settlement increasingly require compliant instruments. At the same time, the fragmented market limits network effects: stablecoins derive much of their utility from scale, and a perimeter that excludes most large tokens constrains liquidity depth for the compliant few.

The stakes are rising as other jurisdictions move. The United States is advancing federal stablecoin legislation, and several Asian regulators have introduced their own regimes. Global issuers now face a patchwork of requirements, and the EU's early-mover advantage in codifying rules could erode if MiCA proves too rigid for the market it seeks to govern.

Circle's proposal lands at a moment when EU institutions are reviewing how the framework has performed in practice. Any revision would require agreement between the European Commission, Parliament, and Council, a process that typically takes months if not years. Until then, the authorization gap persists, and European market participants must operate with a shrinking menu of compliant large-cap stablecoins.

The coming months will show whether EU regulators respond to issuer pressure with targeted fixes — for example, adjusted reserve or disclosure requirements — or hold the line on a framework whose authors deliberately set a high bar. For Circle and its competitors, the answer will shape the competitive map of the world's first comprehensive stablecoin regime.