What is MiCA and Why It Matters
The Markets in Crypto‑Assets Regulation (MiCA) became fully applicable across the European Union in late 2024. As the EU’s first comprehensive regulatory framework for digital assets, MiCA replaces fragmented national rules with a single, harmonized structure. It targets three core areas: crypto-asset service providers (CASPs), stablecoin issuers, and token projects.
MiCA enforces strict licensing requirements for CASPs, demands capital reserves for stablecoin issuers, and mandates disclosure and consumer protection standards. The regulation’s goal is to ensure investor safety, reduce systemic risk, and provide clarity across all 27 EU member states.
One of the key strengths of MiCA is its attempt to unify the digital finance market under a clear legal umbrella. But just months into full implementation, an emerging loophole threatens to weaken its core protections.
The Stablecoin Fungibility Loophole
A pressing vulnerability within MiCA revolves around the concept of stablecoin fungibility. Leading stablecoin issuers like Circle and Tether operate across multiple jurisdictions. They can issue the same token—such as USDC or USDT—within the EU under MiCA-compliant rules and simultaneously outside the EU under different or more relaxed regulatory conditions.
Because these tokens are fungible, meaning interchangeable on a one-to-one basis, an EU consumer may unknowingly hold a token that is backed by non-EU reserves. Even if the EU-issued stablecoin meets MiCA’s requirements, it can still be swapped with versions issued elsewhere that do not meet those standards.
This creates what regulators call a “contagion channel.” In a worst-case scenario, if the offshore version of a stablecoin de-pegs due to mismanaged reserves, the impact could still hit EU markets. MiCA’s reserve rules would be undermined not by failure within the EU, but by exposure to external risks funneled in through token fungibility.
As a result, MiCA’s goal to shield EU consumers and institutions from unstable assets could be compromised. This risk is not theoretical—it has become a growing concern among European policymakers and financial regulators.
AMLA Steps In
To address these evolving threats, the European Anti-Money Laundering Authority (AMLA) was formally empowered in July 2025. Based in Frankfurt, AMLA has identified crypto assets as the leading money laundering risk across the European Union.
One of AMLA’s primary responsibilities is to supervise the largest crypto service providers and stablecoin issuers. While its full supervisory authority will be rolled out by 2028, the agency has already begun laying the groundwork to oversee cross-border crypto transactions, monitor reserve backing for stablecoins, and enforce anti-money laundering compliance.
AMLA’s mandate is broader than traditional national regulators. It coordinates with national financial intelligence units (FIUs), the European Central Bank, and ESMA, ensuring that compliance gaps—such as those created by stablecoin fungibility—are addressed through coordinated EU-wide action.
In the context of MiCA, AMLA’s involvement is critical. The stablecoin loophole could become a major vehicle for money laundering or terrorist financing if left unchecked. The combination of offshore reserve opacity and onshore token usage demands a stronger, more unified enforcement mechanism.
Member-State Licensing Disparities
Another challenge to MiCA’s effectiveness lies in how member states apply the regulation. While MiCA aims for harmonization, the pace and rigor of implementation vary significantly between countries.
Some jurisdictions, notably Malta, have been flagged for fast-tracking crypto licenses. This opens the door to regulatory arbitrage—where firms establish a presence in the most lenient country but use EU passporting rights to operate across the entire bloc.
In contrast, countries like France and Germany have taken a more cautious approach. Their national regulators have adopted stricter criteria for licensing, risk management, and reserve transparency. This divergence creates a fragmented enforcement landscape, undermining MiCA’s goal of consistent, pan-EU standards.
The inconsistency means that crypto companies may gravitate toward lenient jurisdictions to minimize compliance costs, while still accessing the broader EU market. Without unified enforcement, MiCA’s credibility and effectiveness could be diminished.
What’s Next for Regulators and Industry
The future of MiCA will depend on how quickly EU institutions respond to the challenges posed by fungible stablecoins and uneven national implementation. There is growing momentum for:
- Tighter interoperability rules to manage fungibility risks
- Independent audits of stablecoin reserves, especially those with mixed jurisdictional backing
- Coordination between AMLA, ESMA, and national regulators to align enforcement
- Technical guidance to standardize how MiCA-compliant tokens interact with global markets
These actions are vital for preserving financial stability and protecting EU investors. Without reform, the stablecoin loophole could lead to unintended contagion, undermining the entire regulatory framework.
For early adopters, fintech startups, and institutional investors, these developments are not just regulatory noise—they are central to building long-term trust in the European crypto ecosystem. MiCA represents a bold and necessary step forward. But its success depends on facing the complex reality of a global, borderless financial system.
Keynotes
- MiCA became fully applicable across the EU in December 2024, harmonizing crypto regulation
- Stablecoins issued inside and outside the EU remain fungible, exposing users to offshore risks
- The stablecoin fungibility loophole could allow non-compliant reserves to affect compliant tokens
- AMLA gained formal power in July 2025 and has named crypto as the EU’s top money laundering risk
- AMLA will directly supervise large crypto firms starting in 2028
- ESMA has warned of regulatory arbitrage, citing countries like Malta for issuing licenses too quickly
- Coordinated oversight and cross-border reserve audits are key to closing the loophole
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