Europe is about to let in the stablecoins nobody understands
Tether has never held a MiCA licence. Europe’s largest crypto exchanges list it anyway, routing round the rule rather than through it, because European users keep asking for it and European law has no answer for what happens when they get it. That gap is what the European Commission opened a consultation to close on 20 May, and it is due to report by the end of August. The proposal under discussion would let non-EU stablecoin issuers operate inside the bloc, provided their home regimes are judged equivalent to Europe’s own.
It is a sensible fix to a real problem. It is also the wrong problem to be fixing alone.
What MiCA never asked
The Markets in Crypto-Assets Regulation, when it came into force in 2024, built a reasonably coherent perimeter around issuers, reserves and redemption rights — for firms based in the EU. It said almost nothing about what happens when the reserves, the redemption promise and the legal recourse all sit in Delaware or the Cayman Islands, and the user sits in Frankfurt. The review now under way exists because that omission became untenable once the United States passed its own stablecoin framework, the GENIUS Act, and dollar-backed tokens started moving faster than European law could track them.
So the Commission is doing the obvious thing: building an equivalence regime, so a Tether or a Circle can operate in Europe if their home jurisdiction meets EU standards. Patrick Hansen at Circle put the current situation plainly — European users are, in his words, either unprotected or cut off. Fair enough. But notice what the fix targets. It targets the issuer. It says nothing about the person deciding whether to hold, recommend, or process one of these instruments in the first place.
The compliance officer who has to decide
There is no functional way to explain to a client why a dollar-backed token redeemable in Delaware carries different risk from a euro-denominated one licensed in Paris. That is not a knowledge gap you close with a leaflet. It is a structural one, because the products changed faster than the training did.
Multiply that by whatever number of newly admitted, differently domiciled stablecoins come through an equivalence regime once it’s live, and the problem doesn’t shrink. It compounds. A compliance officer at a mid-sized UK bank will soon have to assess counterparty risk across issuers governed by two, three, possibly more overlapping regulatory regimes, each with its own redemption mechanics and its own definition of what “backed” actually means. Nobody has built the training for that. Nobody is planning to.
There’s a parallel worth a sentence, no more: this is roughly the same shape of problem HMRC created with Making Tax Digital, where the compliance machinery got upgraded and the humans required to operate it didn’t. Regulators are good at building rails. They are not, on the whole, in the business of teaching people to walk them.
Equivalence is not understanding
The Commission’s equivalence test — is a foreign regime “as good as” ours — answers an institutional question. It does not answer a human one. A stablecoin issued under an equivalent regime is not therefore a stablecoin your average IFA, or your average retail saver, has any better grasp of. Equivalence tells the regulator the plumbing is sound. It tells the person holding the asset nothing at all.
ESMA’s own parallel review of custody and operational resilience, running from July through the first half of 2027, is a tacit admission of this. If the infrastructure needs eighteen months of scrutiny before anyone trusts it, the case for pausing on capability is at least as strong. Yet capability doesn’t appear on the consultation’s list of questions — I’ve read it twice to check.
The reckoning
None of this is an argument against opening MiCA to non-EU issuers. American money is not going to wait for Brussels to feel ready, and pretending otherwise just pushes European users back into the unlicensed grey market this review is meant to close. But a regulator that spends three years building an equivalence regime for issuers, and zero months building capability for the people who have to apply it, has solved half a problem and called it done.
The Commission has until the end of August to decide what the next phase of MiCA looks like. It should ask, alongside every question about reserves and redemption, who in the market is actually equipped to price the risk it’s about to let in — and what it intends to do about the ones who aren’t.
