Report urges MiCA reforms for euro stablecoins

TLDR

A new policy report says current MiCA rules make euro stablecoins very safe but uncompetitive and calls for targeted reforms.

1. The report urges changes to MiCAs reserve, interest and transparency rules so euro stablecoins can compete with dollar tokens.
2. Today euro stablecoins are tightly regulated but tiny in market share, partly because MiCA bans interest and forces large bank-deposit reserves.
3. EU officials are already discussing a possible MiCA 2, but supervisors warn that loosening rules too far could create new financial-stability risks.

Deep Dive

1. What The Report Wants Changed

A Blockchain for Europe report co-authored by ECB official Ulrich Bindseil argues that MiCA has put euro-denominated electronic money tokens (EMTs) on the ultra-safe but commercially weak path.

Key recommendations include:

1. Relaxing MiCAs hard requirement that at least 30 percent of reserves (60 percent for significant issuers) sit in bank deposits and instead using a principle-based test aligned with existing EU liquidity rules.
2. Allowing a broader mix of high-quality liquid euro assets in reserves.
3. Reconsidering the strict ban on any form of remuneration so euro stablecoins are not structurally worse than bank deposits or foreign stablecoins.

They also suggest giving large issuers limited access to central bank settlement accounts during stress episodes to reduce run risk.

2. Why Euro Stablecoins Lag

Despite the euros importance in traditional finance, euro stablecoins account for less than 1 percent of global stablecoin volume according to the report.

MiCA requires full backing and bans paying interest on EMTs, specifically to stop them competing with insured bank deposits. In a positive interest-rate world, that makes euro tokens less attractive than both bank deposits and some dollar stablecoins that can route yield through DeFi or rewards structures.

On top of that, the high mandated share of reserves as bank deposits is not seen in other major jurisdictions and may raise costs and concentration risk for issuers.

3. MiCA 2 And Risk Trade-offs

The report lands as EU officials openly discuss a potential MiCA 2 review once the first version beds in. Some, especially in France and ECB circles, want stronger support for euro-native stablecoins to reduce dependence on dollar tokens.

However, bodies like the European Banking Authority warn that weakening safeguards could invite regulatory arbitrage and amplify systemic risks, especially if large euro stablecoins start to resemble money market funds without matching oversight.

Conclusion

The core message is that MiCA has delivered safety and legal clarity for euro stablecoins but at the cost of commercial appeal compared with dollar tokens. The regulatory debate is shifting from whether to allow stablecoins to how to calibrate rules so euro tokens can scale without undermining banks or financial stability. For crypto users, the opportunity is a potentially richer euro stablecoin ecosystem, but only if MiCA 2 finds a workable balance between yield, reserves and risk control.