MiCAs mistake: EU policy encourages US dollar dominance

The following is a guest post and opinion of Eneko Knörr, CEO and Co-Founder of Stabolut.

The European Unions Markets in Crypto Assets (MiCA) regulation was intended to establish clarity and safety within the crypto landscape. Yet, paradoxically, its overly restrictive stance on euro-denominated stablecoins could inadvertently secure the U.S. dollars continued dominance in global finance.

Stablecoins have become indispensable in the global digital economy, enabling fast, transparent, and borderless transactions. Currently, more than 99% of the stablecoin market is pegged to the U.S. dollar. Rather than challenging this monopoly, Europes MiCA regulation makes it increasingly difficult for euro-backed stablecoins to gain significant traction.

While openly declaring we dont want stablecoins, as we want to push our CBDC would have faced severe criticism, MiCA cleverly achieves nearly the same result by imposing such strict regulatory constraints that euro-stablecoins become practically unfeasible.

The effect is subtle yet clearMiCA effectively suppresses private euro-stablecoin innovation in favor of a central bank digital currency. This regulatory environment has inadvertently provided a major advantage to USD-stablecoins, reinforcing the U.S. dollars position as the worlds primary transactional currency. Despite narratives around declining dollar dominance, stablecoins are fueling a renaissance for USD, embedding it deeper into the global financial fabric.

Interestingly, this is happening at a time when BRICS countries and even the EU itself are actively seeking to challenge the dominance of the U.S. dollar in global markets. Ironically, however, as global trade moves increasingly toward blockchain-based transactions, the importance of stablecoins is increasing dramatically.

Strong USD-backed stablecoins will play a pivotal role in ensuring that the dollar maintainsor even expandsits global market share.

In contrast, Europes ambition to elevate the euro through a CBDC misses the mark entirely. The EUs belief that a euro CBDC will succeed and significantly enhance the euros global influence is not only misguided but naive.

A CBDC might seem innovative on paper, but history suggests government-led initiatives struggle to match the creativity, efficiency, and adaptability of private-sector innovation. Furthermore, CBDCs inherently raise concerns around privacy, governmental overreach, and consumer autonomy.

Its genuinely saddening to realize Europe is missing this critical point.

The U.S. appears to understand this dynamic clearly. By resisting the temptation to launch a federal CBDC and instead fostering private stablecoins, American regulators are ensuring that innovation remains swift, market-driven, and globally competitive.

Europes misstep with MiCA isnt merely a missed economic opportunity; its a strategic error that could have profound geopolitical implications. By stifling euro-stablecoins, Europe inadvertently reinforces USD dominance at precisely the moment when a viable, globally accepted euro-stablecoin could offer meaningful competition and diversity.

While policymakers may believe theyre safeguarding the financial system, in reality, theyre building a regulatory moat around irrelevance. As crypto adoption accelerates globally, capital, talent, and innovation are flowing to jurisdictions that embrace experimentation. Europes cautious overreach risks turning it into a spectator in the next era of financial infrastructurewatching from the sidelines as others write the rules.

If Europe is serious about the euros global standing, it must reconsider its approach. The future of money will likely be shaped by those who empower innovation rather than those who restrict it. Unfortunately for Europe, MiCA might just turn out to be the best thing to ever happen to the U.S. dollar.

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Text source: CryptoSlate

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