Circle Exec Says EU Risks “Regulatory Own Goal” Amid MiCA–PSD2 Clash
Stablecoin companies within the European Union are approaching a serious regulatory problem. Beginning in March 2026, suppliers of e-money token (EMT) custody and switch companies could also be required to carry each a MiCA crypto license and a separate cost companies license for a similar exercise.
This scenario creates a big compliance burden, with business leaders warning it may stall euro stablecoin adoption.
Regulatory Overlap Triggers Compliance Crisis
The root of the difficulty is the overlap between the MiCA (Markets in Crypto-Assets) regulation and the Payment Services Directive (PSD2).
In June 2025, the European Banking Authority issued a No Action Letter to make clear the interplay between MiCA and PSD2 for crypto asset service suppliers managing EMTs.
The steerage confirmed that custody and transferring stablecoins on behalf of purchasers is a cost service below PSD2. As a outcome, firms already licensed under MiCA to deal with EMTs should additionally safe a cost establishment license or work with a licensed cost service supplier.
The EBA has offered a transition interval till March 2, 2026. During this era, nationwide authorities ought to chorus from imposing twin licensing necessities. This association ends in lower than 5 months.
After that, crypto companies will face two regulatory frameworks for a single enterprise exercise, successfully doubling capital necessities and compliance prices.
This twin licensing strategy contradicts the core aim of MiCA, which is to attain unified regulation. The EBA acknowledged in its official opinion that any monetary exercise ought to fall below one regulation.
Yet, each MiCA and PSD2 now govern stablecoin custody and switch companies, leading to redundant oversight that will increase prices with out bettering client safety.
Capital necessities spotlight the burden. A enterprise holding each licenses should meet:
- MiCA’s €125,000 minimal capital for crypto asset service suppliers
- Another €125,000 for PSD2 cost companies
These totals €250,000 or virtually $290,000. Additional compliance, reporting, and supervisory charges for each regimes additional improve operational challenges.
Industry Warns of Competitiveness Damage
Patrick Hansen, Circle’s EU coverage lead, has underlined the danger this regulatory battle poses. In a put up on X (Twitter), Hansen said that failing to resolve the MiCA–PSD2 conflict earlier than the March 2026 deadline could be a serious setback for the EU.
“Under present EBA steerage, companies utilizing e-money tokens (EMTs) may quickly face twin licensing necessities: a MiCA CASP licence, and a PSD2 (quickly PSD3) cost licence for a similar custody or switch exercise — beginning March 2026. That means regulatory duplication for companies dealing with stablecoin companies,” Hansen explained.
Hansen argues that the twin licensing lure contravenes EU ideas of proportionality, authorized readability, and consistency.
The scenario additionally conflicts with EU efforts to scale back regulatory complexity and enhance competitiveness. Initiatives such because the European Commission’s simplification agenda and Mario Draghi’s competitiveness report name for fewer regulatory obstacles, no more.
Beyond compliance prices, the overlap has wider results. Crypto asset service suppliers distribute the vast majority of MiCA-regulated stablecoins.
If twin licensing makes these companies unsustainable, suppliers might exit the EU or reduce their operations. This state of affairs would gradual the growth of euro-pegged stablecoin, undercutting the EU’s ambitions in digital finance and the worldwide position of the euro.
A Journal of International Economic Law examine demonstrates that the EU has applied the strictest stablecoin rules amongst main markets. A comparative examine conducted in May 2025 discovered that MiCA units greater prudential and safeguarding requirements than rules within the US and UK.
Adding PSD2 licensing on high of MiCA may drive service suppliers to extra accommodating jurisdictions, widening the regulatory hole.
Proposed Solutions and Legislative Pathway
The EBA’s No Action Letter outlines two predominant legislative fixes.
- Amend MiCA to incorporate related cost service provisions from PSD2.
This would create a single framework for EMT actions, preserving client protections and eliminating the necessity for separate cost licenses.
- Modify the upcoming Payment Services Directive 3 and Payment Services Regulation.
This would exempt MiCA-licensed companies from separate cost service guidelines for EMT custody and transfers.
The European Parliament briefing on PSD3 indicates that the legislative course of is ongoing, with adoption anticipated to happen after 2025.
This offers lawmakers a restricted window so as to add particular exemptions earlier than the March 2026 deadline. Industry voices urge fast motion on two fronts.
- Extend the transition interval past March 2026 to a minimum of 2027 to forestall a regulatory cliff whereas lawmakers adapt the principles.
- Ensure PSD3 carves out or cross-references MiCA-licensed actions, eradicating twin licensing for companies already lined.
- Some proposals additionally counsel exempting first-party EMT transfers to and from self-custody wallets from cost service guidelines.
The EBA’s steerage on streamlined licensing gives interim reduction. National authorities can let companies reuse documentation from their MiCA utility when in search of cost licenses, decreasing administrative duplication.
Supervisors are additionally inspired to ease the enforcement of sure PSD2 provisions, corresponding to safeguarding and open banking guidelines, for EMT companies in the course of the transition.
Nonetheless, essential obligations stay. Strong buyer authentication and cost fraud reporting necessities stay in impact, even in the course of the no-action interval.
These measures assist defend customers as broader reforms transfer ahead. Policymakers should now strike a steadiness between mandatory safeguards and the necessity to eradicate regulatory overlap that could stifle innovation and growth.
The months forward are essential. If the EU doesn’t resolve this regulatory subject earlier than March 2026, the market may fragment, making stablecoin companies too pricey for a lot of suppliers.
Firms might depart, and customers may flip to unregulated or offshore options. Legislative alignment is essential for sustaining a steady and aggressive marketplace for EU stablecoins.
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