MiCA's Stablecoin Safety Net Risks Systemic Collapse

Europe's Markets in Crypto-Assets (MiCA) regulation, hailed as a cornerstone for stabilizing the volatile crypto landscape, may inadvertently be laying the groundwork for a new financial crisis. While the framework mandates proof-of-reserves, capital buffers, and redemption safeguards for stablecoins, critics argue it fails to address systemic risks that could emerge as these digital assets integrate with traditional finance, as a Coindesk opinion argues. The irony, as one analyst notes, is that MiCA's "comfort blanket" of micro-prudential oversight legitimizes stablecoins without equipping regulators to contain their macroeconomic fallout, the Coindesk piece adds.

The transition of stablecoins from niche crypto tools to mainstream payment instruments is reshaping the financial ecosystem. By mimicking the properties of bank deposits—liquidity, accessibility, and near-zero volatility—stablecoins now compete directly with traditional banking systems. This shift could distort monetary policy transmission, as funds move from fractional-reserve banks into crypto-backed tokens tied to short-term government bonds, the Coindesk piece warns. The Bank of England (BoE) has already flagged the risk, with Governor Andrew Bailey advocating for stablecoins to be regulated like banks and proposing caps on holdings to mitigate systemic exposure, the article also notes.

Compounding the issue is the rise of decentralized finance (DeFi), which Standard Chartered predicts will challenge traditional finance (TradFi) with $2 trillion in tokenized real-world assets by 2028. This growth is fueled by the 2025 stablecoin boom, which has injected on-chain liquidity into DeFi lending and borrowing platforms. However, U.S. regulatory delays threaten to stifle this momentum, creating uncertainty for market participants, the Coindesk markets report says.

Regulatory arbitrage further exacerbates the problem. The UK's Financial Conduct Authority (FCA) has adopted a cautious stance toward domestic stablecoins but remains permissive toward offshore ones, exposing users to risks beyond its jurisdiction, the Coindesk opinion argues. This loophole incentivizes issuers to relocate operations while still serving onshore clients, recreating the shadow-banking dynamics regulators sought to eliminate, the piece adds.

MiCA's blind spot lies in its assumption that proof-of-reserves equates to stability. Fully collateralized stablecoins can still trigger liquidity crises during redemption panics or amplify shocks if holders treat them as insured deposits, the Coindesk opinion warns. Moreover, the framework lacks tools to manage currency substitution risks, where USD-denominated tokens could drive de facto dollarization in non-U.S. economies, the article observes.

The hybrid nature of stablecoins—blending DeFi's efficiency with TradFi's credibility—poses unique challenges. Unlike bank deposits, stablecoins are digital assets, yet their widespread adoption blurs the line between private property and public money, the Coindesk opinion notes. Policymakers like the BoE and U.S. lawmakers proposing the GENIUS Act recognize these risks but lack a unified framework to address them, the piece concludes.

As stablecoins scale, the need for macro-prudential tools—such as issuance limits, liquidity facilities, or resolution mechanisms—becomes urgent. Without them, MiCA's legacy may be not as a crisis preventer, but as a catalyst for the next financial upheaval, the Coindesk opinion warns.