How MiCA Compliant is USDC Really?
A Deep Dive into some MiCA Shenanigans
Regulate Me Harder Daddy
Circle has aggressively marketed USDC as the first MiCA-compliant global stablecoin, but recent public research challenges this claim. A detailed analysis by Membrane Finance, which specializes in MiCA-compliant stablecoin issuance, raises serious questions about Circle’s actual compliance with MiCA and its market practices. The research suggests that Circle missed key regulatory deadlines, lacks proper authorizations, and may have even plagiarized compliance documents from other issuers.
I’ve done my best to try and examine the credibility of these claims and the potential implications for the stablecoin landscape in the EU.
Key Allegations Against Circle’s MiCA Compliance (The Dirt)
1. USDC Was Not Properly Authorized Under MiCA
One of the most serious accusations is that Circle did not have the necessary authorizations to continue operations under MiCA by the regulatory deadline of June 30, 2024. According to Membrane Finance:
Circle’s EMI (Electronic Money Institution) authorization was granted on July 1, 2024; after the compliance deadline
MiCA requires issuers to notify authorities at least 40 working days before offering e-money tokens (EMTs) publicly. Since Circle had no competent authority before July 1, its May 31 notification could not have been valid
This could mean that any public offer of USDC/EURC in the EEA before the proper notification period is technically illegal
2. USDC’s Redemption Process Violates MiCA
Under MiCA, stablecoins must be redeemable at par value for all holders at any time on all supported blockchains. The research notes:
Circle does not offer redemptions on 9 of the blockchains where USDC operates (at the time of this public paper)
Redemptions are not always honored within the required timeframe; one test redemption request went unanswered for over 11 days
This contradicts MiCA’s consumer protection requirements, which mandate immediate and guaranteed redemptions for e-money token holders.
3. Circle’s White Papers Are Non-Compliant
MiCA requires that issuers publish stablecoin white papers in a structured, machine-readable format (iXBRL) and with specific legal disclosures. The report claims:
Circle’s white paper does not comply with MiCA formatting standards
Key regulatory disclosures, such as public offerors of USDC, are missing, which could make every venue where USDC is offered technically non-compliant
Circle does not disclose digital token identifiers, violating another MiCA provision
4. USDC’s Reserve Practices & EU Regulatory Conflicts
Beyond MiCA, Circle’s operational model raises concerns under the EU’s Electronic Money Directive (EMD):
USDC reserves are primarily held outside the EEA (Sheeeeeeeee)
Circle operated across the EEA without proper passporting until July 4, 2024
Additionally, MiCA explicitly prohibits interest-bearing stablecoins (Article 50). The research cites Circle’s MiCA Redemption Policy and its relationship with Coinbase, which appears to offer USDC holders indirect yield; potentially violating MiCA’s anti-interest provisions.
5. Accusations of Plagiarism (The Motive)
Perhaps the wildest claim is that Circle allegedly plagiarized portions of its white paper from Membrane Finance:
The formatting and wording of risk disclosures are nearly identical to Membrane’s white paper
The same mitigation measures and risk descriptions appear across both documents, despite MiCA allowing for “free alphanumerical text” responses, making such similarity unlikely by chance
If true, this would raise serious questions about Circle’s regulatory credibility and diligence in meeting MiCA standards, as well as their potentially lazy compliance team.
Evaluating the Credibility of the Research (The Afterthought)
Membrane Finance presents compelling technical arguments, but there are a few factors to consider when assessing credibility:
The report was authored by Patrick Aarikka, a Compliance Officer at Membrane Finance, whose master’s thesis on MiCA received top marks. However, Membrane is a direct competitor to Circle, so its findings should be cross-verified with independent sources
MiCA is still new, and some compliance requirements are subject to interpretation. Circle may argue that it meets the spirit of MiCA, even if it falls short on technicalities. LOL
As of now, no EU regulatory body has publicly reprimanded Circle for MiCA non-compliance, though that could change if the concerns gain traction
Potential Consequences for Circle, USDC and some crooked EU politicians
If these allegations were to come out as true, it will cause for tumultuous times:
If EU regulators determine that Circle violated MiCA, it could face penalties, restrictions, or even a temporary ban on USDC in the region. Lobbying by Circle must have involved monetary donations
Large financial institutions and businesses looking for a MiCA-compliant stablecoin will shift away from USDC toward fully compliant alternatives
EU-based stablecoins like EUROe, EURØP, and Monerium, of which two obtained regulatory approval earlier, could gain traction as preferred MiCA-compliant options
If Circle is exaggerating its MiCA compliance, trust in its broader regulatory claims through overexaggerated marketing efforts (including in the U.S.) could erode
Healthy Skeptics Live Longer
Membrane Finance makes a strong case that Circle was not fully compliant with MiCA by the required deadline. This will only lead to significant enforcement action if there was outright corruption; additionally regulators often allow companies to catch up on compliance rather than immediately penalize them. Remember “the spirit”?
The bigger issue is whether MiCA compliance actually matters in the long run. If stablecoin users prioritize liquidity, accessibility, and institutional adoption over regulatory compliance, then Tether and other non-compliant stablecoins will continue dominating the market anyway. Assuming Tether survives the changing regulatory landscape in the US.
Ultimately, this debate is less about compliance and more about power; whether regulatory frameworks like MiCA can actually dictate the winners in the stablecoin race or if market forces will render compliance a formality rather than a necessity.
Circle promotes USDC as the first MiCA-compliant stablecoin, but this research presents strong evidence that it may not actually meet full compliance. Issues related to authorization timing, redemption policies, white paper formatting, and interest-bearing rewards all raise red flags.
If EU regulators do act at some point, it won’t just be a fight over compliance; it will be a geopolitical battle over which stablecoins shape the future of continents.