EU regulations It’s pushing the stubcoin giant towards the US, turning European users into a kind of digital limbo.
The cryptocurrency ecosystem is going through key stages in the regulatory process that can determine the future for the next few decades. At the heart of this process is something stable. Cryptocurrencies are fixed at stable values such as the dollar and euro. Currently, there is an infrastructure essential to the entire crypto market, with over $160 billion in capital.
The regulatory approaches of the EU and the US are in contrast. The rigidity of European Michal, the more flexible American genius. A game that looks like Europe has already begun to lose.
European Regulation Wall: Michal and its Hardness
It has entries for Mika Regulations and the impact on the European Union’s stubcoin was immediate and destructive. Tether (USDT),, The world’s largest stub coin from a list for European customers.
“While users may still retain USDT, it is becoming more difficult or impossible to exchange directly for the Euro or use it on EU-compliant platforms.”
Brave new coin The reported facts, although created with protective intent, create a major barrier for European investors, highlight the practical effects of regulations.
Mika split the stubcoin into two categories. Electronic Money Token (EMT), It is fixed to a single official currency Asset Reference Token (Art), Linked to a basket of assets. The point is that for both, many operators place strict requirements so strict that they have escaped the European market.
“The EU will go ahead if you’re using Stablecoin to buy crypto and do Defi things. But if you want to use Stablecoin to pay for goods and services like coffee or rent, you’ll need to use Stablecoin in Euro.”
Ledger Insights In summary, we explain the logic of financial sovereignty that underlies European restrictions.
Chain that suffocates innovation and development
Mika imposes a set of restrictions that make operational prohibitive on global stubcoin issuers.
1. Quantitative Limitations on Use: Issuance must be suspended if the use as a medium of exchange is 1 million transactions and exceeds 200 million euros daily. Tether It travels between $1.5 billion and $67 billion every day.
2. Reservation Localization Requirements: For EMTs, European banks must hold at least 60% of their reserves. For art, at least 30%. This will fragment the issuer’s reserve global management.
3. Limitations on eligible equipment: Reserves can only be invested in highly conservative measures, as they have limits beyond those applicable to traditional banks.
4. Semi-binding authorization regime: Issuers must undergo a complex approval process and double-level oversight involving both European authorities (EBA, ESMA) and national authorities (Italy, Bancado Italy, Consobu).
5. Complex Crisis Management Procedures: If issues arise, issuers must follow procedures borrowed from bank regulations, including the possibility of extraordinary management and forced administration liquidation.
Tether Case: Giant’s Restoration
Tether’s response to European imposition was symbolic. Paolo AldoinoThe company’s CEO expressed considerable indifference to complying with European regulations, preferring to focus on less-regulated and more profitable markets, such as in Asian and Latin American markets.
Meanwhile, it is only natural that they are not interested in fundamentally changing the business model of a market representing a part of the company’s global business, which manages more than $100 billion in Stablecoins, which cycles over $100 billion in Stablecoins.
This choice impacts our ability to operate effectively in the global crypto market, bringing immediate results for European users who are gradually being blocked by European users.
The American Approach: The Road of Genius and Flexibility
On the other side of the Atlantic, the US follows a fundamentally different approach. Recently approved by the Senate with broad bipartisan support (66-32), the Genius Act (Guidelines and Establishment of National Innovation for the Stablecoins Act in the US), outlines a more balanced and practical regulatory framework.
The difference between the European model is substantial.
1. Broad and comprehensive definition: The Genius Law defines “payment stable coins” in a flexible enough manner to include various operating models without the rigid classification of Europe.
2. Diversified Approval System: Three different approval passes are provided (non-banked federal, depositary subsidiaries, states). This adapts to the operator’s various needs and scale.
3. More flexible reserve requirements: While the 1:1 compensation obligation remains, a wider range of assets are permitted in the reserve, including Treasury bills and repurchase agreements.
4. Lack of quantitative limits: No optional upper limit is imposed on the use of stubcoin, thus promoting organic growth in bull markets.
5. Greater Protection in the Case of Bankruptcy: Stablecoin holders are given absolute priority privileges to claims in the event of an issuer’s bankruptcy, providing better protection compared to the European model.
In short, this approach can do it without throttling innovation and entrepreneurial initiatives while aiming to create security.
European market results: fragmented ecosystems
Global, silly, silly exclusions like tethers from regulated European markets have already produced concrete effects.
1. Liquidity Reduction: European exchanges forced to remove trading pairs with USDT should make sure the liquidity available to users has significantly reduced.
2. Increased transaction costs: Market fragmentation leads to wider spreads and higher costs for European operators.
3. Migrating to unregulated platforms: More experienced users continue to access global stability by moving towards non-European exchanges or Defi Solutions.
4. Competitive Disadvantages: European startups in the fintech and crypto sectors face regulatory barriers that American competitors need to overcome.
As observed in Brave New Coin, true “great departures of non-compliant stubcoins” could emerge from the European market, potentially increasing the adoption of Eu-Native Stablecoins fixed to the euro. However, these latter are still limited by a more restricted European ecosystem, and may never achieve the liquidity and global scope of dollar alternatives.
d.lgs. 129/2024: Completely Italian complexity
In Italy, d.lgs. 129/2024, effective September 14, 2024, carried out Micar by creating a dual supervision system that includes Banca D’Italia and Consob. If the intrinsic complexity of European regulations is not sufficient, this tiering of regulatory authorities adds even more complexity to operators who must communicate with two different authorities and surge in legal compliance costs.
Currently, the order establishes that “the Bank of Italy is assigned the responsibility for careful supervision and crisis management of arts and EMT issuers, while Consove is responsible for transparency, fairness of action and orderly action of transactions.”
This introduces a breakdown of competencies with unclear boundaries, and there is the risk of creating interpretive uncertainties, which already increases the cost of compliance.
It should be noted that these rate ranges, particularly dynamic and creative ranges, typically for startups and small operators, contribute to limiting access to the market, increasing the risk that Italy and Europe will maintain the margins of innovation in the stable coin sector, and more generally digital finance.
Financial Sovereignty vs. Innovation and Market Openness: A False Dilemma?
The comparison between European and American approaches emphasizes a very different regulatory philosophy. Europe declares its priority to protecting its financial sovereignty and economic stability. The US balances consumer protection and promotes financial innovation.
Is this opposition really necessary? Will European financial sovereignty be truly threatened by a more flexible approach to stubcoin? Rather, does regulatory rigidity risk alienating Europe in key sectors of financial innovation?
The choice of tethers to effectively abandon the regulated European market suggests that current restrictions may be counterproductive. The less important message is that the European market is not important enough to justify a fundamental restructuring of the global industrial leader’s operating model.
What will the future be for European stubcoins?
While the US appears to occupy a priority jurisdiction for global stubcoin issuance, capital and innovation, the risks of Europe end in poor, isolated, and less competitive crypto ecosystems.
To avoid this alienation, there is no solution other than a revision of certain aspects of mica. Of these, in particular:
1. Reconsider the quantitative limitations on the use of stable coins. This appears to be arbitrary and disconnected from market reality.
2. Check your reserve localization requirements. This fragments the global management of the same thing.
3. Expand the range of eligible equipment in the reserve to allow for more efficient management while maintaining appropriate safety standards.
4. Simplify approval and supervision procedures, reduce duplication of responsibility, introduce simplified paths for small operators, and reduce related compliance costs.
A more practical balance between regulations and innovation will allow Europe to remain competitive in sectors that represent increasingly strategic elements of global financial infrastructure.
The game is still open
The stable battle between Europe and the US represents a broader challenge. It is a way to effectively regulate digital financial innovation without suppressing it. MICAR must be recognized as the first comprehensive attempt to regulate crypto assets, but the key issue is already clear in the first few months of the application.
The American Genius Act, although not yet clearly approved, provides an overview of alternative models that can better align conservation needs with innovation needs. Europe is currently facing choice. It maintains the path of regulatory rigidity and rethinks its approach to risk future irrelevantness in digital finance and never miss out on the queue of financial innovation forever.
As demonstrated in the Tether incident, global leaders in the sector do not hesitate to turn their backs on markets that are perceived as being overly restrictive. It is also a hopeful idea to hope for the birth and affirmation of local unicorns with existing regulatory barriers.
The challenge for European regulators is to find a balance that protects consumer and financial stability without sacrificing the continent’s digital future.