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European Commission says MiCA rules already tackle stablecoin risks

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The European Commission said on Friday that the EU’s landmark crypto regulation, MiCA, already provides a robust framework to handle risks linked to stablecoins, pushing back against the European Central Bank’s call for stricter safeguards.

Stablecoins—digital tokens tied to fiat currencies like the U.S. dollar or euro—have grown rapidly in recent years, prompting debate over how they should be regulated. While the United States has moved to promote their use, the ECB has warned that some models could threaten financial stability.

At the center of the dispute is whether multinational stablecoin issuers can treat tokens created inside and outside the EU as interchangeable under MiCA’s “multi-issuance” model. In a letter to EU Commissioner Maria Luis Albuquerque this week, six crypto trade groups, including Circle, urged Brussels to clarify that such structures are allowed.

A Commission spokesperson told Reuters that MiCA already provides “a proportionate framework for addressing risks” and said guidance confirming how multi-issuance operates will be published “as soon as possible.”

The ECB’s Systemic Risk Board, chaired by Christine Lagarde, argues that cross-border token issuance could lead to runs on EU reserves if holders outside the bloc attempt to redeem with EU entities during market stress. Stablecoin issuers, however, maintain that adequate reserve management can prevent such instability.

Analysts at J.P. Morgan said this week that 99% of all stablecoins are pegged to the U.S. dollar, noting that the sector’s global expansion could further boost demand for the greenback.

European Securities Regulator Warns Crypto Firms Against Misleading Customers on Regulation

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Europe’s securities regulator, the European Securities and Markets Authority (ESMA), issued a warning on Friday to crypto companies about misleading customers regarding the regulatory status of their products. The caution comes as European authorities intensify efforts to curb risks associated with crypto assets.

Under the EU’s new crypto regulation framework, known as MiCA, a series of investor protections are in place, including rules on safeguarding client assets and managing complaints. However, ESMA highlighted concerns over crypto asset service providers (CASPs) offering both regulated and unregulated products on the same platform, which poses risks to investors who may not clearly understand which products fall under MiCA’s protections.

ESMA pointed out that some CASPs might exploit their regulated status as a marketing tool, potentially confusing customers about which services are regulated. The regulator stressed that firms must not use their MiCA licensing as a promotional device or suggest that all crypto offerings are covered by the EU’s rules when they are not.

Products outside MiCA’s regulatory scope include direct investments in commodities like gold and crypto lending services.

The move follows global regulatory concerns about crypto investor risks, especially after the collapse of major crypto platforms such as FTX in 2022, which resulted in significant investor losses.

MiCA requires companies offering crypto services to obtain a license from national regulators, enabling them to operate across the EU. ESMA also issued guidance on the knowledge and competence standards that staff should meet to properly assess crypto companies.

ESMA’s warning coincides with the release of a peer review on Malta’s licensing process for crypto firms. The review found that while Malta’s Financial Services Authority has sufficient expertise and resources, its authorization procedures only “partially” met expected standards. Malta defended its role as an early adopter of digital asset regulation but did not directly respond to ESMA’s critique.

Concerns have been raised behind closed doors about the rapid pace at which some EU member states grant crypto licenses, according to previous Reuters reports.

Crypto Giants Near EU-wide Licenses Amid Regulatory Tensions

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Two of the largest cryptocurrency firms are close to securing EU-wide licenses under the bloc’s new Markets in Crypto-Assets (MiCA) regulation, sources say, even as regulatory disagreements grow over how quickly and rigorously some member states are approving crypto companies.

MiCA, which came into force earlier this year, allows EU countries to issue licenses enabling crypto firms to operate across all 27 member states. However, concerns have emerged behind closed doors about the speed and standards of some approvals—particularly those from smaller regulators like Malta.

Gemini, the crypto trading platform founded by billionaire Winklevoss twins Tyler and Cameron, is reportedly on the brink of receiving a Maltese license. Malta has previously granted licenses to crypto firms such as OKX and Crypto.com shortly after MiCA’s introduction, drawing criticism from regulators in countries like France, where the financial regulator AMF warned of a potential “regulatory race to the bottom.”

Other EU regulators have voiced concern that smaller authorities with fewer staff, like Malta’s, may not have sufficient resources to rigorously enforce rules. The European Securities and Markets Authority (ESMA) is reviewing Malta’s licensing process and is expected to release a report soon.

The Malta Financial Services Authority defended its fast approvals, citing years of experience and strict anti-money laundering standards. OKX also described its licensing as “rigorous” and compliance-focused.

Meanwhile, Luxembourg is expected to grant a license to Coinbase, the first U.S. crypto company in the S&P 500, though the company’s European operation in Luxembourg is relatively small. Luxembourg’s financial regulator has declined comment, but insiders reject accusations of laxity, suggesting some criticism is driven by competition among member states to attract crypto businesses.

Coinbase’s pending approval represents a setback for Ireland, where skepticism toward crypto has grown, with the Irish Central Bank Governor calling it akin to a Ponzi scheme in 2023.

The global crypto market, currently valued around $3.3 trillion, has endured volatility including the 2022 collapse of major U.S. exchange FTX. The EU continues to struggle with regulatory divergence among member states, while discussions are ongoing about granting ESMA more direct authority over crypto oversight.

ESMA’s head, Verena Ross, has advocated publicly for enhanced powers, but some EU countries remain cautious.