MiCA's Stablecoin Rules Could Exacerbate Systemic Risks, Experts Say

The European Union's Markets in Crypto-Assets (MiCA) regulation, hailed as a landmark framework for crypto oversight, may inadvertently amplify systemic risks in the stablecoin market — as argued in a CoinDesk opinion. Experts caution that while MiCA addresses micro-prudential concerns, it overlooks macro-level vulnerabilities, particularly from cross-border multi-issuer models and the rapid adoption of compliant stablecoins like USDC.

A key concern centers on multi-issuer stablecoins, where tokens are jointly issued by EU and non-EU entities. This structure creates regulatory arbitrage, as reserves are split across jurisdictions, undermining accountability and liquidity management — a risk highlighted in a CEPR column. For example, an EU-issued stablecoin could face redemption runs if holders redeem in the EU while non-EU reserves are inaccessible or restricted during crises. The European Systemic Risk Board (ESRB) warned that such models fragment risk management and increase contagion risks, especially if banks holding stablecoin reserves face liquidity strains.

Today's General Counsel reports that EU regulators are tightening oversight in response. The ESRB has highlighted the dominance of USD-backed stablecoins in the EU, which now account for 99% of the $300 billion stablecoin market. Non-MiCA-compliant tokens like Tether's USDT are being phased out, while compliant stablecoins like Circle's USDC gain traction. JPMorgan analysts noted that USDC's market capitalization surged 72% year-to-date to $74 billion, outpacing USDT's 32% growth, driven by MiCA compliance and institutional trust.

However, the rise of compliant stablecoins raises new challenges. USDC's dominance, bolstered by partnerships with Visa and Mastercard, could accelerate the shift of deposits from traditional banks into tokenized assets, distorting monetary policy transmission. The Bank of England's recent proposal to cap individual stablecoin holdings at £10,000–£20,000 reflects fears that even regulated stablecoins could destabilize the financial system if they scale too quickly.

Critics argue that MiCA's focus on proof-of-reserves and transparency does not address structural risks. By legitimizing stablecoins as "safe" assets, the regulation may encourage widespread adoption without mechanisms to contain systemic fallout. For instance, a redemption panic could trigger fire sales of sovereign debt or amplify liquidity shocks, akin to traditional bank runs.

Meanwhile, global regulatory fragmentation exacerbates the problem. The U.S. GENIUS Act and EU MiCA create divergent standards, pushing issuers to exploit loopholes. Revolut cuts fees with zero-fee USD-to-stablecoin conversions and Western Union's USDPT on Solana underscore the competitive pressure to innovate, even as regulators grapple with cross-border oversight.

Experts urge a coordinated global approach, emphasizing stricter issuance caps, liquidity buffers, and equivalence frameworks to prevent regulatory arbitrage. Without such measures, MiCA's well-intentioned safeguards may fail to prevent a crisis as stablecoins become entrenched in the financial ecosystem.

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: Coinpedia report — South Korea's BDACS To Launch KRW1 Stablecoin on Circle's Arc Blockchain https://coinpedia.org/news/south-koreas-bdacs-to-launch-krw1-stablecoin-on-circles-arc-blockchain/

Western Union Introduces USDPT Stablecoin on Solana https://finance.yahoo.com/news/western-union-introduces-usdpt-stablecoin-020545539.html

Multi-issuer stablecoins: A threat to financial stability https://cepr.org/voxeu/columns/multi-issuer-stablecoins-threat-financial-stability

MiCA Won't Save Us from a Stablecoin Crisis. It Might be ... https://www.coindesk.com/opinion/2025/10/31/mica-won-t-save-us-from-a-stablecoin-crisis-it-might-be-building-one

EU Regulators Tighten Oversight of Stablecoins and ... https://todaysgeneralcounsel.com/eu-regulators-tighten-oversight-of-stablecoins-and-crypto-markets/

TronWeekly report — Stablecoin Surge as JpMorgan Says USDC Overtakes USDT in On-Chain Growth https://www.tronweekly.com/stablecoin-surge-as-jpmorgan-says-circle-usdc/

JPMorgan says Circle's USDC stablecoin outpaces Tether's USDT in onchain growth https://www.theblock.co/post/377031/jpmorgan-circle-usdc-stablecoin-tether-usdt-onchain-growth

Revolut Cuts Fees, Enables 1:1 USD to USDT and USDC Swaps https://blockonomi.com/revolut-cuts-fees-enables-11-usd-to-usdt-and-usdc-swaps/