MiCA’s regulations on stablecoins may heighten systemic risks, according to experts

The European Union’s Markets in Crypto-Assets (MiCA) regulation, widely regarded as a milestone in crypto regulation, could unintentionally heighten systemic threats within the stablecoin sector, according to arguments presented in

. Specialists warn that although MiCA tackles individual firm risks, it fails to address broader systemic issues, especially those arising from cross-border, multi-issuer arrangements and the swift uptake of compliant stablecoins such as .

A major issue involves stablecoins issued by both EU and non-EU organizations. This model enables regulatory loopholes, as reserves are distributed across different legal systems, weakening oversight and liquidity controls — a concern raised in

. For instance, if a stablecoin issued in the EU faces mass redemptions while reserves outside the EU are frozen or limited during a crisis, it could trigger a run. The European Systemic Risk Board (ESRB) has cautioned that such arrangements fragment risk controls and heighten contagion dangers, particularly if banks holding these reserves encounter liquidity problems.

notes that EU authorities are increasing their scrutiny in response. The ESRB has pointed out that USD-pegged stablecoins now dominate the EU market, representing 99% of the $300 billion stablecoin sector. Non-compliant tokens like Tether’s are being phased out, while compliant alternatives such as Circle’s USDC are gaining market share. observed that USDC’s market value has jumped 72% so far this year to $74 billion, surpassing USDT’s 32% increase, largely due to MiCA compliance and growing institutional confidence.

Yet, the growing influence of compliant stablecoins brings fresh risks. USDC’s expanding presence, supported by collaborations with Visa and Mastercard, may speed up the movement of deposits from conventional banks into digital tokens, potentially disrupting monetary policy. The Bank of England’s recent suggestion to limit individual stablecoin holdings to £10,000–£20,000 reflects concerns that even regulated stablecoins could threaten financial stability if their growth is unchecked.

Some critics say MiCA’s emphasis on reserve verification and openness does not tackle underlying structural threats. By endorsing stablecoins as “safe” assets, the regulation might encourage widespread use without adequate safeguards against systemic crises. For example, a sudden rush to redeem could force mass sales of government bonds or intensify liquidity shocks, similar to traditional bank runs.

At the same time, inconsistent global regulations make matters worse. Divergent rules from the U.S. GENIUS Act and the EU’s MiCA prompt issuers to seek regulatory gaps.

by offering no-fee USD-to-stablecoin swaps, and on highlight the race to innovate, even as authorities struggle with cross-border regulation.

Industry experts call for unified international standards, stressing the need for stricter issuance limits, robust liquidity reserves, and harmonized frameworks to close regulatory loopholes. Without such coordination, MiCA’s protective measures may fall short as stablecoins become more deeply integrated into the financial system.

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