Stablecoins, once the unchallenged workhorses of the crypto economy, are entering a phase of intense scrutiny. Regulatory frameworks are evolving rapidly on both sides of the Atlantic — and they’re not always in sync. As the EU rolls out MiCA and the U.S. edges closer to enacting the GENIUS Act, stablecoin issuers are facing a crossroads. Will USDT and USDC continue to dominate, or is the market primed for disruption?
How Will MiCA and U.S. Regulations Reshape the Stablecoin Market?
Stablecoins have long operated under the unspoken rule: if it’s not explicitly illegal, it’s allowed. That era is over. As of June 24, 2025 the Total Stablecoin Market Cap was $225.20 billion — such market size and its unregulated nature was an obvious problem for governments and investors as well.
Europe and the U.S. have responded with different visions for how stablecoins should be governed. Let’s break down what those visions mean for the future of money.
What Is MiCA?
The Markets in Crypto-Assets Regulation, or MiCA, is the European Union’s first comprehensive legal framework for digtal assets, establishing oversight of stablecoins and setting standards for a broad range of crypto-assets and trading platforms. Adopted by all 27 member states in 2022, MiCA came into force in late 2024.
MiCA was born out of concern. Reports by both the European Parliament and European Central Bank pointed to 3 risks surrounding stablecoins:
- unclear issuer identities,
- questionable asset backing,
- presence in an inherently volatile market.
These concerns accelerated MiCA’s rollout — particularly Titles III and IV, which regulate stablecoins. While the full law took effect in December 2024, the sections affecting stablecoins were enforced five months earlier, in July 2024.
How MiCA Regulates Stablecoins
MiCA places the following compliance obligations on stablecoin issuers:
- They must obtain a license from an EU member state.
- Issuers must disclose their business model, risk management protocols, and reserve structure.
- The issuer is required, in addition to maintaining reserves, to hold own funds as collateral. The amount must be equal to the highest of the following: €350,000, 2% of the average amount of the reserve assets, or one quarter of the fixed overheads from the previous year.
- Reserve assets cannot be commingled with the issuer’s own funds.
- At least 30% of reserves must be held in the reference fiat currency.
All reserves must be stored with licensed European banks. - Daily payment transactions using a single asset-referenced token may not exceed €200 million (or 1 million transactions) within a given currency area; if this cap is breached, the issuer must halt further issuance and submit a reduction plan within 40 working days.
MiCA also introduces the category of “significant stablecoins” — those with market caps above €5 billion. These must be approved by the European Banking Authority (EBA) and backed 60% in fiat, effectively preventing 100% backing with yield-generating securities.
One of the thorniest issues is custodianship: stablecoin issuers are now forced to park funds in EU-licensed banks, assuming full responsibility for any deposit-related risks.
These changes have drawn strong reactions from market participants and regulatory experts. For example, Michael Ryan, a financial expert with over 25 years of experience in planning and compliance, shared a sharp critique with TradeSanta:
“MiCA’s €200 million daily issuance caps and USDT delistings are breaking institutional stablecoin trading. All while the US is rolling out the red carpet with SEC clarity and bipartisan congressional support.
I see us watching a massive capital migration. Where Europe’s fortress mentality is handing America the future of digital dollar dominance. I don’t think this regulatory arbitrage is just about crypto. To me, it’s reshaping which continent will control the next generation of global finance.”
How MiCA Regulations Impact European Stablecoin Markets
It didn’t take long for the backlash to start. Tether’s CEO made it clear that the company would not be applying for a MiCA license, citing user protection and criticizing what he sees as the ECB’s political agenda behind the digital euro. As a result, USDT has been delisted from major exchanges operating within the EU block.
Still, Tether isn’t bowing out entirely. In a strategic pivot, they launched two new stablecoins — EURR and USDR — through third-party issuers such as StablR and Oobit, which do comply with MiCA, which was a smart workaround that signals Tether’s intention to remain relevant in Europe without direct exposure to MiCA’s harshest obligations.
Meanwhile, U.S.-based Circle, the issuer of USDC, took a more traditional path. It secured an Electronic Money Institution (EMI) license to continue operations within the EU. But CEO Jeremy Allaire warned that storing 60% of reserves in European banks could introduce unacceptable counterparty risks. Unlike banks, stablecoin issuers can’t lend out deposits — yet they’re expected to shoulder the same financial burdens.
In effect, MiCA appears to use foreign crypto capital to bolster domestic banking infrastructure, while shutting stablecoin firms out of monetary policy influence. The rhetoric is about investor protection and anti-money laundering — but the mechanics speak to something deeper, you name it.
The U.S. Approach: What Is the GENIUS Act?
While Europe enforces, the U.S. debates. On 17 June 2025, the U.S. Senate voted to pass the GENIUS Act with 51 senators voted for the initiative, 23 against. Next, the bill will be considered by the House of Representatives, which will decide whether to adopt it in its current form or to promote an alternative version.
Jeremy Allaire, Co-founder and CEO of Circle, tweeted: ‘History is being made’. The company could be a major beneficiary if the US officially recognises stablecoins as part of the payment system, given that Circle issues USDC, the second largest stablecoin in the world after Tether’s USDT.
If the Genius Act is passed, licensing will open the door to banks, fintech startups and even large tech companies to enter the industry. And in terms of their backing by dollar assets, including short-term U.S. bonds, this change could curb the growth of government debt and reduce servicing costs, as well as expand global access to digital dollar infrastructure.
What’s in the GENIUS Act?
The GENIUS Act represents the first comprehensive stablecoin bill under U.S. law and outlines several key obligations for issuers:
- Reserves must be held in U.S. dollars, short-term Treasury bills (less than one year), or similarly liquid assets.
- Monthly disclosures on reserve composition.
- Annual audits for companies with stablecoin market caps above $50 billion.
- Mandatory AML/KYC programs and suspicious activity reporting.
- Issuers must demonstrate the ability to freeze and burn tokens.
- Non-compliant foreign issuers could be banned from operating in the U.S.
To get a quick, side-by-side view of where GENIUS Act supporters and critics agree, or clash, we mapped their key points in a table below:
| Genius Act supporters | Genius Act opponents |
| Investor protection. Unified reserves and mandatory audits minimize the chance of a “Luna-style” collapse. | Undermines decentralization. The government gains the power to force-freeze tokens. |
| Strengthens the U.S. dollar. About 99% of stablecoins are already USD-denominated; the law would amplify the dollar’s global influence. | Corruption risks. The draft does not explicitly ban officials from holding the very stablecoins they would regulate. |
| Competition boost. Clear rules would attract banks and fintech start-ups, reducing the USDT/USDC duopoly. | Oversight complexity. The more issuers there are, the harder it is to enforce compliance. |
Austin Rulfs, an SME investor and crypto analyst, shared his thoughts with us:
“The approach to US regulations is still more disjointed; although some states are implementing their own standards, stablecoin issuers and users are left in the dark due to the absence of uniform federal regulations. The goals of US and MiCA rules are to lower market risks and maintain stability, but they also raise compliance costs for stablecoin initiatives, which may limit their scalability and uptake.”
How GENIUS Act Will Impact Stablecoins?
The short answer: it depends. For users seeking accountability and transparency, GENIUS Act could be a win. More audits, clear disclosures, and regulated entities may boost trust.
For issuers, however, GENIUS Act adds a layer of legal friction. Onboarding, user verification, and reserve mandates will require new infrastructure and compliance strategies. And of course, for crypto libertarians and privacy advocates, GENIUS Act is a red flag — another step toward expanding state control in decentralized markets.
Despite headwinds, stablecoins are booming. In June 2025, total market cap surpassed $250 billion — a milestone that Kronos Research CEO Hank Huang called “a turning point.” In his view, stablecoins are no longer an experiment; they’re infrastructure. He predicts the market could double by 2026, driven by new entrants — including bank-issued tokens and politically connected projects like USD1, launched by World Liberty Financial and reportedly backed by U.S. President Donald Trump.
But not everyone is cheering. Senator Elizabeth Warren called the GENIUS Act “the worst possible approach,” arguing that it fails to address conflicts of interest. Critics point to USD1’s $2 billion deposit into Binance — a move that raised eyebrows about self-dealing.
What’s Next for Stablecoins: Predictions 2025–2030
The road ahead for stablecoins splits in two directions. On one hand, clearer regulation could draw in institutional players, establish industry standards, and foster healthy competition. On the other, it might unintentionally give rise to a parallel market of unregulated, censorship-resistant “black” stablecoins operating outside the legal framework.
Ki Young Ju, CEO of CryptoQuant, believes there’s a real risk of overregulation. He paints a scenario where stablecoins become subject to traditional banking controls — think automated tax withholding baked into smart contracts, wallet freezes, and full-blown KYC requirements for every transaction. For users relying on stablecoins for privacy or unrestricted international transfers, that could be a dealbreaker.
While industry voices warn of unintended consequences, some institutions are looking further ahead — modeling what the future might realistically hold depending on how regulation and adoption unfold.
A recent report by Citi Institute, titled Blockchain & Digital Dollar, outlines three possible futures for the stablecoin market by 2030:
- Bear case: Market size hits just $0.5 trillion due to heavy regulation and limited adoption.
- Base case: Reaches $1.6 trillion with stablecoins gaining moderate traction in payments and trading.
- Bull case: Explodes to $3.7 trillion, driven by mass adoption in cross-border transactions and business payments.
Citi also expects the vast majority — around 90% — of these stablecoins to be pegged to the U.S. dollar. And if current trends hold, issuers could become some of the largest holders of U.S. Treasuries, potentially investing over $1 trillion into short-term government debt.
Final Thoughts
The era of regulatory uncertainty is ending. The explosive growth of the stablecoin market has made regulation inevitable. Both the American GENIUS Act and the European MiCA — despite their differences — share a common goal: to bring stablecoins under control and protect investors.
But the consequences will vary.
The trajectory will depend on how well regulators balance security, innovation, and inclusion. Push too hard, and parallel, unregulated markets may emerge. Strike the right balance, and stablecoins could redefine the future of global finance.
FAQ
What is MiCA and how does it affect stablecoins?
MiCA (Markets in Crypto-Assets) is a European law that sets strict rules for stablecoins. It requires issuers to be licensed, hold reserves in European banks, and limit daily transactions. Coins like USDT may be restricted or delisted in the EU if they don’t comply.
What is the GENIUS Act and what does it mean for stablecoins in the U.S.?
The GENIUS Act is a proposed U.S. law to regulate stablecoins. It would require regular audits, reserve backing in U.S. dollars or Treasuries, and strong anti-money laundering controls. It aims to make stablecoins safer and more widely accepted in the U.S.