Closing the Gap: Safeguarding the EU from Non-MiCA Stablecoins

Key Points：

• MiCA Framework Limitations: The EU regulation covers only stablecoins issued entirely under MiCA.
• Multi‑Issuance Risk: When EU and non‑EU entities jointly issue fungible stablecoins, MiCA does not extend to non‑EU partners.
• Redemption Pressure: In a run, investors may redeem in the EU for stronger safeguards, potentially overwhelming EU-based reserves.
• Equivalence & Safeguards Needed: Non-EU issuers must meet robust equivalence standards and ensure assets are transferable to EU.
• Global Regulatory Competition: U.S. stablecoin legislation and possible Chinese yuan‑stablecoin heighten the international competition.

MiCA Framework Limitations

The EU’s Markets in Crypto‑Assets Regulation (MiCA), fully applicable since December 2024, is one of the world’s first comprehensive legal frameworks for crypto-assets, aiming to protect investors and stabilize markets. It mandates that stablecoin issuers are fully reserve-backed, enable redemption at par, and maintain substantial reserves in bank deposits.

However, MiCA’s coverage is limited to issuers entirely under the EU regulatory regime. This creates a loophole for multi‑issuance schemes involving EU and non‑EU entities, which remain largely unregulated concerning the latter parties.

Risks in Multi-Issuance Schemes

When a stablecoin is jointly issued by EU- and non-EU-based entities, MiCA does not hold the non‑EU issuer to its standards. Investors, seeking the safest environment for redemption—where fees are prohibited and rules are strict—will turn to the EU jurisdiction. However, reserves held within the EU may not be adequate to satisfy a sudden surge in redemptions.

This mismatched liquidity risk has analogues in traditional banking: if different parts of a financial group hold assets and reserves across borders, liquidity shortages in one region can cascade catastrophically—exactly the concern MiCA aims to mitigate.

Redemption Pressure and Liquidity Risk

In times of financial stress, investors naturally choose jurisdictions with stronger safeguards. The EU’s redemption-at‑par protection and no‑fee policy make it a magnet for withdrawals. Without sufficient reserves, EU-based issuers could face liquidity exhaustion. Lagarde warned this shortfall could exacerbate systemic risk unless corrective legislation is enacted now.

The Need for Equivalence and Safeguards

Lagarde urges that stablecoin schemes jointly issued by EU and non‑EU entities must be subject to “robust equivalence regimes”—that is, non‑EU issuers must adhere to standards comparable to MiCA, including full reserve backing and guaranteed redemption at par value.

Additionally, she demands safeguards for the transfer of assets between non‑EU and EU entities to prevent jurisdictional friction during runs.

Intensifying Global Competition

The global stablecoin landscape is evolving rapidly. In July, the U.S. Congress passed a stablecoin framework law that may advantage U.S. dollar‑pegged issuers. Simultaneously, China is reportedly considering a yuan‑pegged stablecoin following its digital yuan initiative.

Piero Cipollone of the ECB warned that such foreign regulation—or lack thereof—could shift euro deposits abroad and further entrench the dollar’s dominance in global payments.

A comparative bar chart showing “Regulatory Coverage” across MiCA (EU), U.S. stablecoin framework, and proposed Chinese yuan‑stablecoin, plus EU reserve capacity versus potential redemption demand.

Summary

The EU’s MiCA regulation marks a pioneering effort to regulate crypto-assets. Yet significant risks linger where non-EU actors can bypass its stringent standards, especially in multi‑issuance stablecoin schemes. The potential for a run on EU-based reserves during crises underscores the urgency of closing regulatory gaps. Lagarde’s call for equivalence, robust safeguards, and international coordination is essential—not only for consumer protection but for financial stability. As the U.S. and China push ahead with their own stablecoin agendas, the EU must swiftly respond to preserve the integrity of its financial ecosystem.