Circle opens institutional USDC borrowing with Bitcoin via Morpho on Arc and Ethereum

The European System of Central Banks has asked the European Commission to delete a MiCA rule that forces large stablecoin issuers to hold 60% of reserve funds in commercial banks, the same clause Tether refused an EU license over. The ESCB, which groups the European Central Bank with the national central banks of all 27 EU member states, filed its comments on Tuesday as part of the Commission's review of MiCA, the bloc's crypto rulebook. The filing argued that money swinging with token creation and redemption is not stable deposit money and that heavy redemptions could drain it from lenders overnight, so it wants a minimum share of reserves held in assets maturing within one to five working days. The same filing said regulators face material challenges enforcing the rules because non-compliant crypto firms still reach EU customers, and the ECB has separately warned that euro stablecoin expansion could squeeze bank lending. Under MiCA the deposit floors are tiered, with ordinary issuers required to keep 30% of funds in bank deposits and issuers the EU labels significant required to keep 60%. Tether, which issues USDT, the largest stablecoin, never sought the license, and chief executive Paolo Ardoino has argued since 2024 that the floor makes tokens less safe, noting EU deposit insurance stops at 100,000 euros. Revolut dropped USDT for Europe this year, and BeInCrypto reported in July that Circle was backing a MiCA rule change that could bring Tether back. The consultation closes on September 30, and the 30% and 60% floors remain law until EU lawmakers amend MiCA, with Tether still holding no EU authorization.