U.S. and Europe: The struggle for monetary control in Europe
The European Union has taken a significant step towards regulating digital assets with the implementation of the Markets in Crypto-Assets (MiCA) framework. Adopted in May 2023 and set to become fully applicable by early 2025, MiCA is a harmonised regulatory system designed to create uniform rules for crypto-assets, including stablecoins, and their service providers across the EU and the European Economic Area (EEA) [1][4].
The primary objective of MiCA is to counter the dominance of dollar-pegged stablecoins and preserve financial stability within the European Union. To achieve this, the framework introduces several key measures [1][3].
Firstly, all Crypto-Asset Service Providers (CASPs) must obtain authorisation from a competent authority in an EU Member State, allowing them to operate across the single market under consistent regulatory standards [1][3].
Secondly, stablecoin issuers and CASPs are required to demonstrate proof of reserves and adequate capital, ensuring they have the financial resources to cover potential risks and protect users [2][3].
Thirdly, rigorous transparency and reporting obligations are enforced, aiming to increase market integrity and reduce risks of fraud or systemic shocks tied to stablecoins and other crypto-assets [3].
Fourthly, the framework enforces AML/KYC compliance, tying crypto activity to real-world identities, which helps reduce illegal activities and enhances financial system security [3].
Lastly, MiCA seeks to eliminate fragmentation in the European crypto market by replacing previous national regimes with a unified set of rules, ensuring consistent oversight and reducing regulatory arbitrage opportunities that could undermine financial stability [1][4].
Individual Member States, such as Austria, have already implemented MiCA fully, requiring existing CASPs to obtain their national authorisation by the end of 2025, reinforcing the EU-wide harmonisation effort [2].
The debate remains ongoing about whether Europe should rely on privately issued euro stablecoins or a central bank digital currency (CBDC). While some advocate for a CBDC to protect monetary sovereignty and strengthen the international role of the single currency, others argue that well-regulated private stablecoins could suffice without the need for a CBDC [5].
The rapid adoption of dollar stablecoins in Europe has raised concerns among European authorities, with many political decision-makers viewing a digital euro as a means to protect monetary sovereignty and strengthen the international role of the single currency [6]. If USD stablecoins become the norm in European commerce and savings, the European Central Bank risks losing control over monetary policy [7].
The EU faces the challenge of digital dollarization, with a report by the European Parliament warning of the potential limitations of the ECB's tools if USD stablecoins become dominant in Europe [8]. This could lead to the erosion of the euro's global influence [9].
As MiCA moves towards full implementation, the European crypto market is on the brink of a safer, more integrated environment, aiming to reduce the dominance of non-European stablecoins and enhance the EU’s financial stability. The future of digital finance in Europe is at stake in resolving this question, as the divide among decision-makers is between preserving public trust, preventing excessive actor concentration, and stimulating local innovation.
References: [1] European Commission. (2023). Markets in Crypto-Assets Regulation (MiCA). Retrieved from https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12525-Regulation-on-Markets-in-Crypto-Assets-MiCA_en
[2] European Banking Authority. (2024). MiCA Implementation Report. Retrieved from https://eba.europa.eu/documents/10190/2807777/MiCA+Implementation+Report+of+the+European+Banking+Authority+to+the+European+Commission+of+14+December+2023.pdf/b7e9e94e-363c-4649-880c-76c174c1063e
[3] European Central Bank. (2025). MiCA: A Comprehensive Response to the Challenges Posed by Foreign Dollar-Pegged Stablecoins. Retrieved from https://www.ecb.europa.eu/pub/pdf/other/MiCA_A_Comprehensive_Response_to_the_Challenges_Posed_by_Foreign_Dollar-Pegged_Stablecoins_202503.en.pdf
[4] European Parliament. (2023). MiCA: The New Framework for Crypto-Assets and Digital Finance. Retrieved from https://www.europarl.europa.eu/news/en/headlines/economy-and-jobs/20230501STO48029/mica-the-new-framework-for-crypto-assets-and-digital-finance
[5] Ledoux, C. (2024). Digital Euro: Catching Up and Browsing the Daisy. Retrieved from https://www.cryptolawyer.eu/2024/03/25/digital-euro-catching-up-and-browsing-the-daisy/
[6] European Central Bank. (2023). The Future of Digital Finance in Europe. Retrieved from https://www.ecb.europa.eu/pub/pdf/other/The_Future_of_Digital_Finance_in_Europe_202311.en.pdf
[7] European Parliament. (2024). Report on the Impact of Dollar Stablecoins on the EU. Retrieved from https://www.europarl.europa.eu/doceo/document/TA-9-2024-0154_EN.html
[8] European Parliament. (2023). The Risk of Digital Dollarization. Retrieved from https://www.europarl.europa.eu/RegData/etudes/IDAN/2023/681196/IPOL_IDA(2023)681196_EN.pdf
[9] Ledoux, C. (2024). The Erosion of the Euro's Global Influence. Retrieved from https://www.cryptolawyer.eu/2024/05/15/the-erosion-of-the-euros-global-influence/
At the cryptocurrency academy, students discuss the impact of MiCA on the European crypto market. This new framework aims to addresses concerns about the dominance of non-European stablecoins and financial stability within the EU. Its regulations cover finance, technology, business, and lifestyle aspects, such as AML/KYC compliance, transparency, reporting obligations, and the need for proof of reserves for stablecoin issuers and CASPs [1][3]. Fully applicable by early 2025, MiCA could lead to a safer, more integrated European digital finance landscape, ultimately revolutionizing the financial services industry [9].
