EU Stablecoin Regulation Ranked Most Restrictive Globally

The European Union's regulatory framework for stablecoins has been deemed the most restrictive globally, according to a recent analysis by EY. The Markets in Crypto-Assets (MiCA) regulation requires stablecoin issuers to maintain 1:1 backing with segregated assets and sets out strict reserve requirements.

Under MiCA, all stablecoins must be backed by at least 30% of reserves held in bank deposits for non-significant tokens. For significant tokens, the requirement increases to 60%. This bank deposit mandate is a key differentiator from other regulatory frameworks, such as those in the US and UK.

The European Banking Authority (EBA) oversees significant tokens directly, and stablecoin holders must be able to redeem their tokens at par value at any time. Issuers are also prohibited from offering interest on stablecoin holdings.