Europe is reviewing its crypto regulation framework MiCA, three years post-implementation, with a focus on stablecoins and centralized oversight.
Europe is currently reassessing its regulatory framework for cryptocurrencies, known as MiCA, three years after its implementation. This initiative, informally dubbed "MiCA 2.0," is set to wrap up its consultation process in September.
Revisiting the MiCA Framework
The MiCA framework, initially focused on spot cryptocurrencies, is under scrutiny as the growing popularity of stablecoins and tokenization influences institutional finance. European regulators are reconsidering their initial skepticism towards stablecoins, especially following the introduction of the U.S. GENIUS Act, which has set a precedent for stablecoin regulation.
Concerns persist, however, regarding how stablecoin reserves are managed, particularly by non-U.S. banks. The European Central Bank (ECB) has expressed worries that the dominance of dollar-pegged stablecoins could undermine its monetary authority. While it favors a central bank digital currency (CBDC) over euro-backed stablecoins, some officials are beginning to accept stablecoins for certain uses, as noted by John Orchard from the Digital Monetary Institute at OMFIF.
“European Central Bank officials' opinions on stablecoins are evolving, indicating a willingness to consider their role in remittances,” Orchard stated.
In 2025, the U.S. enacted the GENIUS Act, creating a regulatory framework for stablecoin payments and assigning oversight to the Federal Reserve and the Office of the Comptroller of the Currency. Currently, dollar-denominated stablecoins dominate the market, accounting for $310 billion of the total $311 billion.
Risks of Deposit Flight
Another significant concern is the potential for deposit flight, where funds shift from traditional banks to blockchain wallets. This issue has been highlighted in the U.S. Clarity Act, which is still under legislative discussion. Orchard remarked that banking lobbies in both the U.S. and Europe have opposed allowing stablecoins to provide yields due to fears of deposit flight, though the EU Commission may revisit this topic.
A key difference between U.S. and European approaches is that MiCA mandates stablecoin reserves to be returned to the banking sector, while the GENIUS Act allows reserves to be held in U.S. government securities. The EU is also exploring the creation of a euro-denominated stablecoin through a coalition called Qivalis, which aims to address regulatory concerns and counter U.S. dollar dominance.
Centralized Oversight Considerations
Discussions are ongoing about centralizing oversight of MiCA under the European Securities and Markets Authority (ESMA). This could streamline regulatory processes but may also introduce bureaucratic challenges. Orchard noted that current supervision is fragmented across national authorities, and any changes would require updates to the regulation.
Denzel Walters from crypto trading firm B2C2 emphasized the importance of maintaining a favorable environment for businesses, regardless of whether regulation is national or European. “The focus should be on enabling businesses to thrive,” he stated.
