Europe’s MiCA framework is now entering a review phase—often referred to as “MiCA 2.0”—with a public consultation expected to run until around September.
It has been six years since the EU first proposed the Markets in Crypto-Assets (MiCA) regulation and three years since it came into force. In that time, the landscape has shifted significantly, particularly with rising demand for stablecoins as a tool for cross-border payments among businesses and individuals.
As a result, stablecoins—digital assets pegged to fiat currencies—have moved to the center of the discussion as regulators reassess MiCA, which was originally built with spot crypto markets in mind.
The European Central Bank has consistently warned that the growing dominance of dollar-backed stablecoins could undermine its control over monetary policy across the eurozone. While the ECB continues to favor a central bank digital currency over privately issued euro stablecoins, some policymakers appear to be softening their stance, according to John Orchard of OMFIF.
Orchard noted that views within the ECB are not uniform, but there is increasing openness to allowing stablecoins on bank balance sheets or for remittance use. However, officials remain cautious about their role in large-scale settlement systems—an area where the U.S. has shown greater willingness to experiment.
In contrast, the U.S. has already moved ahead with legislation such as the GENIUS Act, which defines stablecoin-based payments and assigns oversight responsibilities to key regulators. Dollar-backed stablecoins dominate the market, accounting for nearly all of its total value, while non-dollar alternatives remain negligible.
Another major concern for policymakers is the risk of “deposit flight,” where funds shift from traditional bank accounts into crypto wallets, along with ongoing debates around whether stablecoins should offer yield. While banking lobbies in both the U.S. and Europe have pushed back against yield-bearing stablecoins, the European Commission is reportedly revisiting the issue, though significant changes appear unlikely.
A key structural difference remains: MiCA requires stablecoin reserves to be held within the banking system, whereas U.S. frameworks allow reserves to be invested in government debt. This has led to initiatives like Qivalis, a consortium of banks aiming to launch a euro-denominated stablecoin that complies with EU requirements while supporting financial stability and reducing reliance on the dollar.
However, Europe faces challenges such as the absence of a unified sovereign bond market comparable to U.S. Treasuries. One proposed workaround involves creating a synthetic “safe asset,” where stablecoin reserves are invested in European money market instruments.
Regulators are also grappling with how to treat multi-issuer stablecoins like USDC, which are issued by different legal entities across jurisdictions but function as a single token. While MiCA initially aimed to accommodate such models, concerns raised during implementation—particularly by the ECB—have complicated that approach.
Industry participants argue that stablecoins derive much of their value from being globally interoperable, and imposing geographic restrictions risks fragmenting that utility.
Beyond stablecoins, another major topic in the MiCA review is whether to centralize supervision under the European Securities and Markets Authority (ESMA). While this could reduce inconsistencies across member states, it also raises concerns about over-centralization and added bureaucracy that could hinder innovation.
Currently, oversight is handled by national regulators, and any shift toward centralized supervision would require legislative changes. Policymakers are also considering how MiCA aligns with other frameworks such as MiFID.
From an industry perspective, firms operating in Europe emphasize the importance of maintaining regulatory flexibility and supporting business growth. Financial hubs like Luxembourg, for example, are valued for their expertise in enabling cross-border services, and companies hope such advantages will be preserved as the regulatory framework evolves.
Ultimately, stakeholders agree that the success of MiCA 2.0 will be judged not just by regulatory clarity, but by its ability to foster innovation and allow businesses to scale effectively across Europe and beyond.
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