MiCA has made euro stablecoins safe but weak, new report argues

A new report released Monday from industry group Blockchain for Europe argues that the European Union’s flagship crypto laws, the Markets in Crypto-Assets Regulation (MiCA) framework, have produced euro-denominated stablecoins that are ultra-safe but commercially weak, leaving the bloc far behind US dollar-pegged tokens in digital payments and trading.

The report cites DeFiLlama data that euro stablecoins account for less than 1% of global stablecoin volume despite the euro’s much larger role in global markets, and argues that MiCA has pushed them onto the “downward-sloping” part of a regulatory "Laffer" curve, where stricter rules reduce the activity they are meant to govern.

Drafted by European Central Bank official Ulrich Bindseil and Blockchain for Europe’s Erwin Voloder, the report focuses on MiCA’s rules for euro electronic money tokens, or EMTs, which must be fully backed and are barred from paying interest.

That remuneration ban was designed to prevent stablecoins from becoming deposit substitutes, but the authors say it leaves MiCA-compliant euro tokens “at a particular disadvantage” in a positive-rate environment, especially versus bank deposits and foreign currency stablecoins that can embed or distribute yield through other mechanisms. They argue this combination of strict safeguards and zero interest has created a safe but structurally uncompetitive euro stablecoin segment.

Calls for targeted reforms

The report places these constraints in a broader policy debate over how MiCA compares with other jurisdictions and how Europe should respond.

The US Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, for example, also prohibits payment stablecoin issuers from paying interest on balances “solely in connection with the holding” of a token, but dollar-pegged tokens remain central to decentralized finance (DeFi) lending pools and other onchain yield strategies, helping them attract liquidity without issuer-paid yield.

Reforming MiCA for Euro Stablecoins. Source: Blockchain for Europe

The authors also criticize MiCA’s requirement that at least 30% of EMT reserves (rising to 60% for significant issuers) be held as bank deposits, calling it a feature “not found in stablecoin regulations in other major jurisdictions.”

They propose replacing rigid thresholds with a principle-based approach aligned with the EU’s Liquidity Coverage Ratio framework and a broader mix of high-quality liquid euro assets.

In place of a full rewrite, the paper urges targeted changes to MiCA’s reserve, remuneration and transparency rules for EMTs and argues that large issuers should also have carefully limited access to central bank settlement accounts in severe stress.

MiCA 2.0 debate and stability concerns

The proposals come as EU officials begin to float the idea of a “MiCA 2” overhaul, with European Commission adviser Peter Kerstens saying at Paris Blockchain Week earlier in April that Brussels is likely to revisit the framework as the market matures.

Any loosening, however, is expected to face resistance, with the European Banking Authority warning in an October 2025 opinion article that proposed changes to MiCA’s technical standards could weaken safeguards and increase arbitrage risks.

The European Central Bank’s own macroprudential analysis this month highlights the financial stability implications of a growing stablecoin market, warning that large-scale euro stablecoin adoption could concentrate demand in short-dated euro-area sovereign bonds and potentially affect yields and liquidity during redemptions, arguing that supervisors must manage these risks as the market develops.

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