The stablecoin loophole that could expose the EU
A regulatory framework must be established for tokens issued both inside and outside the bloc
The EU's landmark crypto regulation, MiCA (Markets in Crypto-Assets), may be failing to contain a growing threat posed by stablecoins issued both within and outside the bloc, warns economist Richard Portes in the Financial Times (The stablecoin loophole that could expose the EU, 25 July, 2025)
Despite MiCA’s aim to unify crypto oversight across member states, a regulatory gap has emerged around so-called fungible stablecoins, tokens backed by fiat currencies and issued by the same global firms in multiple jurisdictions. These stablecoins, such as USDC, can bypass EU safeguards through regulatory arbitrage, allowing firms to shift risk across borders.
Portes highlights that while MiCA sets clear rules for EU-based issuers, including unified reserves and joint liability, it remains silent on stablecoins issued simultaneously from third countries. This creates a scenario where, in the event of a run, EU entities may be forced to honour redemptions without access to corresponding foreign-held reserves, exposing the EU financial system to systemic risk.
Without urgent regulatory alignment and a formal review, Portes warns, the EU could find itself responsible for global liabilities, similar to guaranteeing the solvency of a non-EU bank. He urges the European Commission and Parliament to act quickly before the loophole triggers instability across the bloc’s financial institutions.