On July 1, 2026, the transition period for the EU's MiCA (Mixed Transaction Capability) regulation, CASP (Common Application Provider) officially ended. Immediately afterward, payment infrastructure company Decta released a report outlining seemingly encouraging figures: Over the past year, the market capitalization of MiCA-compliant euro stablecoins increased by 128%, soaring from $295.6 million to $673.9 million. Transaction volume increased by 43.1%, and the number of active currencies increased from 5 to 8. However, the same report also mentions another figure—these eight actively traded euro stablecoins, combined, account for only 0.22% of the market capitalization of dollar stablecoins. How large is the pool of dollar stablecoins? CoinGecko data shows approximately $300 billion. $673.9 million vs. $300 billion. This isn't a catch-up game; it's a story behind the decimal point. MiCA: A Moat or a Self-Built Wall? To understand this awkward 0.22%, we first need to understand what MiCA has done for stablecoins. MiCA, short for Crypto Asset Market Regulation, is the world's first comprehensive regulatory framework for crypto assets, developed by the European Union over nearly four years. It sets strict entry barriers for stablecoins: Issuers must hold sufficient liquidity reserves; they must obtain an electronic money license within the EU; and they must meet a series of requirements regarding information disclosure, governance, and consumer protection. The most crucial and controversial provision is: Stablecoin issuers are prohibited from paying interest to holders. On April 27th of this year, the European Blockchain Organization, in conjunction with Ulrich Bindseil, former Director General of Payments Infrastructure at the European Central Bank, released a report entitled "Reforming MiCA to Promote Euro Stablecoins." The report's core argument can be summarized by an economic concept—the "Regulatory Laffer Curve." The Laffer Curve tells us that higher tax rates are not necessarily better; beyond a certain threshold, tax revenue can actually decrease. Blockchain for Europe believes that MiCA's stablecoin rules have crossed a similar threshold: while security has indeed improved, commercial appeal has been killed. The logic is simple: when a US-issued dollar stablecoin (such as USDT or USDC) can earn a 4-5% return by investing its reserves in US Treasury bonds, while a euro stablecoin issuer is prohibited by MiCA from sharing any returns with users, what will rational market participants choose? The answer is self-evident. The "composition table" of 673.9 million: Who is supporting the narrative? Among the eight active euro stablecoins tracked in the Decta report, Circle's EURC leads the pack with a market capitalization of approximately $430.4 million, accounting for 64% of the total. Second is EURCV, issued by SG-FORGE, a subsidiary of Société Générale, with a market capitalization of approximately $137.8 million, representing a year-on-year increase of 180.6%. In other words, this narrative of the "rise of euro stablecoins" is actually a collaborative effort between an American company (Circle) and a long-established French bank. The remaining six stablecoins combined likely share less than $100 million of the market. What's even more intriguing is that Circle, as the issuer of EURC, is also the issuer of USDC. USDC has a market capitalization exceeding $35 billion. This means that Circle's own euro-denominated stablecoin has a market capitalization of only 1.2% of its dollar-denominated stablecoin. For Circle, EURC is more like a compliance ticket, a gesture to European regulators: "Look, I'm also contributing to the euro ecosystem." But the real profit center has always been across the Atlantic. Société Générale's issuance of EURCV through SG-FORGE is more of a strategic positioning move. This is traditional financial giants testing the boundaries of the on-chain world in the safest way possible—it's deployed on Ethereum, Solana, XRP Ledger, and Stellar, but its target customers remain institutions and the wholesale settlement market, still a long way from ordinary users' DeFi wallets. The European Central Bank: Why did it say no to the "self-rescue plan"? In May of this year, the Bruegel Institute submitted a policy document to an informal meeting of EU finance ministers and central bank governors, entitled "A New Strategy to Curb the Risks of EU Stablecoins," co-authored by Jeromin Zettelmeyer, director of the Bruegel Institute. The document's core argument hits the nail on the head: the EU's current strategy of favoring bank-issued tokenized deposits and suppressing private stablecoins is backfiring. It is not protecting the euro—but rather pushing demand toward dollar-denominated stablecoins. Bruegel calls this "infrastructure dollarization": when dollar-denominated stablecoins become the de facto standard for on-chain settlement, transaction activity will flow away from the Eurosystem's infrastructure, and the euro's core operational position in digital finance will be quietly eroded. Even more dangerous is that European users holding large amounts of dollar-denominated stablecoins mean they are inadvertently assuming the exchange rate and fiscal risks of the United States. In response, Bruegel proposed four reform recommendations: Relaxing the MiCA requirement that issuers deposit 30%-60% of their reserves in bank deposits; allowing issuers to pay interest to holders (but below the ECB policy rate and deposit rate); allowing EU-regulated stablecoin issuers to access the ECB's balance sheet and enjoy lender of last resort facilities; and accelerating the ECB's Appia project to ensure DLT... Interoperability between the platform and the Eurosystem payment infrastructure. However, at the informal meeting in Nicosia on May 22-23, ECB President Lagarde's team directly rejected these proposals. The ECB's opposition had three points: First, the risk of bank disintermediation. If stablecoin issuers could withdraw deposits from banks on a large scale, banks' funding costs would rise, and their lending capacity would decline. For Europe, an economy reliant on bank credit transmission, this is no small matter. Second, the transmission of monetary policy becomes more complex. When large amounts of funds flow from bank deposits to stablecoins, the ECB's traditional path of influencing the real economy through interest rate adjustments will be disrupted, and the effectiveness of interest rate decisions may be diminished. Third, overstepping boundaries. The lender of last resort mechanism is a privilege reserved for regulated banks. Extending this safety net to non-bank stablecoin issuers? The ECB believes this crosses a line. The ECB's alternative is to promote central bank-led projects like Pontes and Appia, using tokenized commercial bank deposits—rather than private stablecoins—to serve as a "pipeline system" for on-chain finance in Europe. In plain terms: You want me to nurture something that might backfire on me? Sorry, I'll do it myself. The Battle for Currency Sovereignty Behind Market Share After reviewing the data comparison above, you might think this is a story of business competition for market share in the crypto market. But in reality, it's a battle for monetary sovereignty. USDT and USDC, stablecoins for the US dollar, have become de facto "reserve currencies" in the on-chain world. They are used for staking in DeFi protocols, for cross-border payments, and even by residents of many emerging market countries who are using them to save money instead of their own currencies. The GENIUS Act, passed in the US in 2025, further solidified this trend. It provided a clear legal status for dollar stablecoins while not prohibiting interest payments—meaning dollar stablecoin issuers could share a portion of their government bond yields with users, something euro stablecoin issuers couldn't do under the MiCA framework. This creates a paradox: the MiCA was intended to protect the European financial system and consumers, but its strict rules objectively pushed issuers and users towards dollar stablecoins. And the growth of dollar stablecoins, in turn, is eroding the euro's digital territory. Bruegel saw this cycle, so he called on the ECB to "intervene." But the ECB saw another cycle: if rules were relaxed to allow private stablecoins to inflate, who would clean up the mess in the event of a run (stablecoins are not bank deposits and are not protected by deposit insurance)? If central banks were forced to provide liquidity support for private stablecoins, how would that be different from bailouts for "too big to fail" banks during the financial crisis? Conclusion Returning to the beginning of the article, the 128% growth is real, but so is the $673.9 million. These two figures, when combined, don't depict a story of "rise," but rather a picture of "growing in the cracks." MiCA has undeniably established the world's most comprehensive regulatory framework for crypto assets. Europe leads in the "quality" of its regulation. However, in the specific arena of stablecoins, a significant gap has emerged between quality and scale. Meanwhile, on July 7, the European Parliament adopted a report entitled "Digital Assets – Challenges to the Competitiveness and Integrity of the EU Financial System," calling on the European Commission to assess whether DeFi, crypto lending, and staking—areas not yet covered by MiCA—should be included in regulation. The European Commission has also launched targeted consultations on the effectiveness of MiCA, with the question of whether the interest rate ban should be reconsidered explicitly on the agenda. Security, competitiveness, and monetary sovereignty—when these three goals are simultaneously placed before European policymakers, the order in which each is prioritized will push euro stablecoins towards drastically different futures. The answer to this game isn't in Decta's report, but in the policy direction over the next 12 months.
Brian
Weiliang
Miyuki
Anais