Why Is Everyone Complaining About MiCA?

Europe's regulation problem—and it's not what you think

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Jun 10, 2025

Based on conversations with industry players across the European stablecoin ecosystem, whose insights we gratefully acknowledge.

In December 2024, Europe's Markets in Crypto-Assets Regulation (MiCA) became fully applicable—six years after initial discussions began in 2018. During those six years, Tether, a stablecoin company incorporated in the British Virgin Islands, grew from $20 billion to $150 billion of USDT in circulation. Circle, a stablecoin company incorporated in the US, expanded USDC from near zero to $60 billion. The global stablecoin market exploded from experimental technology to $205 billion in value, processing over $15 trillion annually.

Non-European firms such as Tether and Circle built their dominance not through regulatory clarity but despite regulatory chaos. Circle navigated state-by-state money transmitter licences across America's fragmented system. Tether operated for years in regulatory grey zones. Yet both succeeded by treating regulations as obstacles to navigate rather than barriers to entry—building first, then shaping the legal framework around their operations.

In retrospect, it could be said that MiCA arrived too late to shape the stablecoin markets but just in time to prevent European firms from competing in them. And this timing problem reveals a systematic pattern in how Europe regulates innovation: always reactive to American breakthroughs, rarely proactive for European opportunities.

The Libra Ghost

MiCA's origins expose the pattern. Broader digital finance talks had begun in 2018, but the MiCA proposal itself took shape as Europe's direct response to Facebook's now-defunct Libra project, announced in June 2019. European regulators feared that a tech giant could create a form of private money that might sideline the euro and weaken monetary control. Libra turned abstract concerns into a concrete threat. Over the next several years, EU lawmakers crafted a legal framework to head off that risk.

By the time MiCA was finalised, Libra was dead—killed by regulatory pressure, rebranded as Diem, then abandoned entirely. But the regulations designed to stop it remained. Worse, whilst Europe focused on preventing Facebook's stablecoin, actual dollar-denominated stablecoins from Tether and Circle captured global markets. Europe was still regulating against yesterday's imagined threat whilst tomorrow's real winners built elsewhere.

This reactive pattern repeats across European tech regulation. GDPR emerged partly in response to American platforms' data practices. The Digital Markets Act targets gatekeepers that already dominate. The AI Act addresses risks from systems largely developed outside Europe. Each time, Europe regulates after American innovation defines the market—early enough to constrain European competitors, too late to shape industry development.

The Economics of Delay

MiCA's specific requirements illustrate how reactive regulation creates systematic disadvantages. The reserve composition rules—60% in segregated accounts at banks, 40% in liquid instruments—made sense when designed to prevent Libra-style systemic risks. But they create a permanent revenue disadvantage against established competitors.

For instance, in the US, Circle maintains approximately 10% in cash at banks earning 1-2% and 90% in instruments managed by BlackRock earning 5%+, whereas under MiCA, European issuers must hold 60% in low-yielding bank deposits. On a €1 billion stablecoin, this 3-4% yield difference means €30-40 million less annual revenue. Scale makes this gap insurmountable: at Circle's $60 billion size, the disadvantage would exceed $2 billion annually.

The authorisation requirements compound the timing problem. Société Générale—a major bank with deep regulatory expertise and a massive balance sheet—still faced a lengthy approval process, extensive documentation requirements, significant capital tie-up, the mobilisation of vast resources, and a partnership with BCB to launch its stablecoin EUR CoinVertible. Smaller new entrants cannot afford such upfront costs or resource commitment. By the time European firms complete authorisation, non-European competitors have deepened their network effects.

More fundamentally, MiCA restricts what products can be offered to customers. Non-bank issuers cannot provide individual accounts to retail customers, severely limiting both revenue potential and adoption pathways. It's not just harder to make money—it's harder to get customers when the product offering is so constrained compared to the multi-feature, seamless experience users expect from modern financial services.

These aren't just compliance costs—they're the price of regulating reactively. Rules designed to prevent specific past threats create permanent structural disadvantages when applied to different market realities.

Network Effects Don't Wait

Every month of regulatory deliberation allows incumbents to entrench dominance. Stablecoins exhibit powerful network effects: liquidity begets liquidity, integration drives integration, usage creates usage. A trader choosing between USDT with billion-dollar liquidity pools and a new MiCA-compliant euro stablecoin faces no real choice.

This explains Tether's calculation about MiCA compliance. With $150 billion in circulation and dominant market position, the company’s decision to exit Europe entirely could only hurt less than operational changes. The company built its network when regulations were undefined; now those networks are stronger than any regional rules.

Even early European movers couldn't overcome the timing disadvantage. Monerium obtained an electronic money licence in 2019, before MiCA existed. Stasis launched euro stablecoins years ago. To date, neither has gained significant traction—not only because of regulatory burdens, but also because network effects had already chosen winners.

The Theatre of Complaints

Understanding MiCA's timing problem helps explain why European firms complain so loudly about regulations whilst American firms quietly dominate. When Circle entered Europe, it simply obtained an EMI licence in France and complied with MiCA for both EURC and USDC. The company had resources from its American success and experience navigating complex regulations.

This highlights a crucial difference in approach. American firms treat regulation as an operational challenge to be managed whilst building. They hire lawyers, establish compliance teams, and adapt to rules without stopping product development. Circle spent years obtaining dozens of state licences across America's fragmented system—arguably more complex than MiCA—but never used this as an excuse to delay growth.

European firms face a different reality. They must build from scratch under rules designed for established players, compete against entrenched networks, and generate returns despite structural revenue disadvantages. Some complaints reflect genuine barriers. Others mask deeper problems: lack of capital, limited ambition, or products that wouldn't succeed regardless of regulation.

This pattern extends beyond regulation. As entrepreneur Arnaud Bertrand recently observed about building HouseTrip before Airbnb: European media dismissed his company as a “copycat” whilst celebrating Airbnb as the “real original”—despite HouseTrip launching first. Today, the same institutional bias repeats: Europeans celebrate Circle's IPO and Stripe's recent move into stablecoins whilst lacking domestic champions to spotlight.

This creates a self-reinforcing cycle. European firms demand regulatory certainty before acting. By the time regulations arrive, markets have moved. European firms then blame regulations for their inability to compete, demanding changes that arrive too late to matter. Meanwhile, non-European firms that acted despite uncertainty shape the very markets Europe tries to regulate.

Beyond Reactive Regulation

The uncomfortable truth is that Europe already has efficient payment systems. SEPA enables instant transfers across 36 countries. For most European use cases, stablecoins solve a problem that doesn't exist.

Meanwhile, global demand for stablecoins primarily seeks dollar exposure—the dollar inspires trust (for now), dominates international trade, appears in every Hollywood film. For users in emerging markets (Tether’s prime target) or anyone engaged in cross-border commerce, dollars represent stability and opportunity in ways euros cannot match.

Sure, euro stablecoins could serve niches: programmatic payments in smart contracts, European e-commerce, euro exposure in volatile economies. But these require building products people want, not just compliant ones. MiCA provides the framework; it cannot create the demand.

Breaking the Cycle

MiCA exemplifies a systematic problem that extends beyond cryptocurrencies. Europe excels at regulating yesterday’s threats while tomorrow’s innovations emerge elsewhere. This isn't about having more or fewer regulations than America—it's about regulating at the wrong time for the wrong reasons.

Breaking this cycle requires more than adjusting MiCA's technical requirements. It demands recognising that Europe's institutional preference for certainty before action systematically disadvantages European innovation. It means creating regulatory processes that anticipate European opportunities rather than react to American breakthroughs.

Some European policymakers understand this. The European Central Bank's work on a digital euro, however uncertain its final form, represents proactive thinking about monetary infrastructure. Regulatory sandboxes in various member states allow experimentation before comprehensive rules. But these remain exceptions to the reactive pattern.

The stablecoin market offers a preview of digitalised finance: winner-take-all dynamics, network effects that resist disruption, and infrastructure controlled by early movers. If Europe continues regulating reactively—comprehensive rules arriving after markets crystallise—it will face the same disadvantage across DeFi, tokenisation, and whatever emerges next.

The question isn't whether MiCA's specific requirements are too stringent. It's whether Europe can develop regulatory processes that move with markets rather than behind them. Until it does, European firms will keep complaining about regulations whilst non-European competitors keep building the future.

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From Paris, France 🇫🇷, and Cham, Canton of Zug, Switzerland 🇨🇭

Why Is Everyone Complaining About MiCA?

Europe's regulation problem—and it's not what you think

The Libra Ghost

The Economics of Delay

Network Effects Don't Wait

The Theatre of Complaints

Beyond Reactive Regulation

Breaking the Cycle

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Some non-stablecoin links in today’s edition:

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