MiCA Won’t Save Us from a Stablecoin Crisis. It Might be Building One
The MiCA regulation aims to create order in the stablecoin sector but fails to prevent systemic risks as these tokens become integrated into the global financial system. While it establishes proof-of-reserves and capital requirements, it mistakenly assumes these factors ensure stability. As stablecoins gain acceptance as money, they threaten traditional banking systems by drawing deposits away from banks, leading to reduced credit availability. The Bank of England has expressed concerns about the macroeconomic implications, advocating for strict regulation akin to that of banks. Furthermore, loopholes may encourage offshore operations, perpetuating risks beyond regulators’ control. MiCA acknowledges some risks but lacks a comprehensive approach to treating stablecoins as part of the money supply. Ultimately, while MiCA seeks to legitimize stablecoins, it may inadvertently foster conditions ripe for a financial crisis by not addressing the broader macro-prudential concerns of these new financial instruments.
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