EU regulation is pushing stablecoin giants to the US, leaving European users in a kind of digital limbo.
The cryptocurrency ecosystem is going through a crucial phase in the regulatory process that could determine its future for decades to come. At the center of this process are stablecoins, cryptocurrencies pegged to stable values such as the dollar or the euro: an infrastructure that has become essential to the entire crypto market, with over 160 billion dollars in capitalization.
The regulatory approaches of the EU and the US are opposed: the European MiCAR is rigid, the American GENIUS Act is more flexible. A game that Europe seems to have already started to lose.
Summary
The European regulatory wall: MiCAR and its rigidities
The chains that suffocate innovation and development
The Tether Case: The Giant's Resistance
The American Approach: The GENIUS Act and the Way of Flexibility
The Consequences for the European Market: A Fragmented Ecosystem
Legislative Decree 129/2024: an all-Italian complexity
Monetary sovereignty vs. innovation and market opening: a false dilemma?
What future for European stablecoins?
The game is still open
The European regulatory wall: MiCAR and its rigidities
With the entry into force of the MiCAR regulation , the impact on stablecoins in the European Union was immediate and disruptive: several exchanges announced the delisting of Tether ( USDT ), the largest stablecoin in the world, from their listings for European customers.
“While users may still hold USDT, exchanging it directly for euros or using it on EU-compliant platforms is becoming difficult or impossible,”
reported Brave New Coin, highlighting the practical effect of a regulation that, although born with the intent of protection, is creating significant barriers for European investors.
MiCAR has divided stablecoins into two categories: E-Money Tokens ( EMT), pegged to a single official currency, and Asset-Referenced Tokens (ART), tied to baskets of assets. The point is that for both, it has imposed such stringent requirements that many operators have fled the European market.
“The EU is saying if you want to use stablecoins to buy crypto and do DeFi stuff, go ahead. But if you want to use stablecoins to pay for goods and services like coffee or rent, then you have to use Euro stablecoins,”
Ledger Insights summarized , explaining the logic of monetary sovereignty underlying the European restrictions.
The chains that suffocate innovation and development
MiCAR imposes a series of limitations that make it prohibitive for global stablecoin issuers to operate :
1. Quantitative limits on use: issuance must cease when use as a medium of exchange exceeds 1 million daily transactions and 200 million euros – ridiculous figures in a market where Tether moves between 15 and 67 billion dollars daily.
2. Reserve localization requirements: for EMTs, at least 60% of reserves must be held in European banks; for ARTs, at least 30%. This forces issuers to fragment the global management of their reserves.
3. Restrictions on eligible instruments: Reserves can only be invested in extremely conservative instruments, with limitations that exceed those applied to traditional banks.
4. Quasi-banking authorisation regime: Issuers must undergo complex authorisation processes and a double level of supervision involving both European (EBA, ESMA) and national authorities (in Italy, Banca d'Italia and Consob).
5. Complex crisis management procedures: In case of problems, issuers must follow procedures borrowed from banking regulation, including the possibility of extraordinary administration and compulsory administrative liquidation.
The Tether Case: The Giant's Resistance
Tether's response to European impositions has been emblematic. Paolo Ardoino , the company's CEO, has shown substantial disinterest in adapting to European regulations, preferring to focus on less regulated and more profitable markets such as those in Asia and Latin America.
On the other hand, it is natural that there is no interest in radically changing a business model for a market that represents a fraction of the global operations of a company, which manages over 100 billion dollars of stablecoins in circulation.
This choice has immediate consequences for European users, who find themselves progressively cut off from access to the most liquid of stablecoins, with repercussions on their ability to operate effectively in the global crypto market .
The American Approach: The GENIUS Act and the Way of Flexibility
On the other side of the Atlantic, the US is taking a radically different approach. The GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act), recently passed by the Senate with a broad bipartisan consensus (66-32), outlines a more balanced and pragmatic regulatory framework.
The differences with the European model are substantial:
1. Broad and inclusive definition: The GENIUS Act defines “payment stablecoins” in a way that is flexible enough to include different operating models, without the rigid European categorizations.
2. Diversified authorization system: three different authorization paths are foreseen (federal non-bank, subsidiary of deposit institutions, state), which adapt to the different needs and different sizes of operators.
3. More flexible reserve requirements: The 1:1 coverage requirement remains, but a broader range of assets are allowed in reserves, including treasury bills and repurchase agreements.
4. No quantitative limits: no arbitrary caps are imposed on the use of stablecoins, thus favoring organic growth of the market.
5. Greater protection in the event of insolvency: Stablecoin holders are granted an absolute priority privilege on claims in the event of the issuer's bankruptcy, offering greater protection than the European model.
In short, this approach, while aiming to create security, manages to do so without stifling innovation and entrepreneurial initiative.
The Consequences for the European Market: A Fragmented Ecosystem
The de facto exclusion of global stablecoins like Tether from the regulated European market is already having tangible effects:
1. Reduced Liquidity: European exchanges, forced to remove USDT trading pairs, see a significant reduction in the liquidity available to their users.
2. Increased transaction costs: Market fragmentation leads to wider spreads and higher costs for European operators.
3. Migration to unregulated platforms: Savvy users are moving to non-European exchanges or DeFi solutions to continue accessing global stablecoins.
4. Competitive Disadvantage: European fintech and crypto startups face regulatory barriers that their American competitors don’t have to overcome.
As Brave New Coin has noted, there is a veritable “major exodus of non-compliant stablecoins” from the European market, potentially increasing the adoption of EU-native, euro-pegged stablecoins. But these would still be limited by a narrower European ecosystem and may never achieve the liquidity and global reach of dollar alternatives.
Legislative Decree 129/2024: an all-Italian complexity
In Italy, Legislative Decree 129/2024, which came into force on 14 September 2024, implemented the MiCAR by creating a dual supervisory system involving the Bank of Italy and Consob. If the intrinsic complexity of European legislation were not enough, this regulatory stratification adds further complexity for operators, who must interface with two different authorities and see legal compliance costs skyrocket.
The decree now establishes that “the Bank of Italy is assigned the powers of prudential supervision and crisis management for ART and EMT issuers, while Consob is responsible for transparency, correct conduct and orderly conduct of negotiations”.
This introduces a division of competences with unclear boundaries, which risks creating interpretative uncertainties and increasing the already significant compliance costs.
It should be borne in mind that the size of these burdens, particularly burdensome for startups and small operators, usually dynamic and creative, contributes to limiting their access to the market and increases the risk that Italy and Europe remain on the margins of innovation in the stablecoin sector and, more generally, digital finance.
Monetary sovereignty vs. innovation and market opening: a false dilemma?
Comparison of the European and American approaches highlights profoundly different regulatory philosophies: Europe claims to prioritize the protection of its monetary sovereignty and financial stability; the United States balances consumer protection with the promotion of financial innovation.
Is this opposition really necessary? Would European monetary sovereignty really be threatened by a more flexible approach to stablecoins? Or rather, does regulatory rigidity risk marginalizing Europe in a crucial area of financial innovation?
Tether’s decision to de facto abandon the regulated European market suggests that current restrictions may be counterproductive. The not-so-implicit message is that the European market is not important enough to justify a radical restructuring of the operating model of a global leader in the sector.
What future for European stablecoins?
While the United States appears to be positioning itself as the preferred jurisdiction for issuing global stablecoins, attracting capital and innovation, Europe risks being left with a poor, isolated and less competitive crypto ecosystem.
To avoid this marginalization, there is no other solution than a review of some aspects of MiCAR. Among these, in particular:
1. Reconsider the quantitative limits on the use of stablecoins, which appear arbitrary and disconnected from market reality.
2. Review reserve location requirements, which fragment global reserve management.
3. Expand the range of eligible instruments for reserves, allowing for more efficient management while maintaining adequate safety standards.
4. Simplify authorization and supervisory procedures, reducing overlapping competences and introducing simplified paths for smaller operators, thus reducing the related compliance costs.
A more pragmatic balance between regulation and innovation could allow Europe to remain competitive in a sector that is an increasingly strategic component of the global financial infrastructure.
The game is still open
The stablecoin battle between Europe and the United States is emblematic of a broader challenge: how to effectively regulate digital financial innovation without stifling it. MiCAR deserves credit for being the first organic attempt to regulate crypto-assets, but its critical issues are already evident in the first months of application.
The American GENIUS Act, although not yet definitively approved, outlines an alternative model that could better reconcile the needs of protection with those of innovation. Europe now has a choice before it: persist on the path of regulatory rigidity, risking irrelevance in the future of digital finance, or rethink its approach so as not to definitively miss the train of financial innovation.
As the Tether case has shown, global industry leaders will not hesitate to turn their backs on markets perceived as overly restrictive, and it is unrealistic to hope for the birth and affirmation of local unicorns with existing regulatory barriers.
The challenge for European regulators will be to find a balance that protects consumers and financial stability without sacrificing the continent’s digital future.
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