The regulatory framework established by the Markets in Crypto-Assets (MiCA) highlights a significant disconnect from the actual dynamics of the stablecoin market. This analysis draws on insights from Professor Chiu’s article published in The International Lawyer in May 2025.

MiCA's design is heavily influenced by the recommendations of the Financial Stability Board concerning “global stablecoins.” However, this approach has created systemic disincentives that obstruct both innovation and market participation, particularly impacting “gateway stablecoins,” which currently represent the majority of market activity.

A central focus of this analysis involves a regulatory typology that clearly distinguishes between global stablecoins, which serve as instruments for cross-border payments, and gateway stablecoins, which facilitate cryptocurrency trading. The empirical evidence highlights the departure of major stablecoin providers, including Tether, MakerDAO, and Binance, from EU markets following the implementation of MiCA regulations.

Additionally, the paper critiques this defensive regulatory posture, suggesting that the prioritisation of monetary sovereignty may inadvertently suppress beneficial innovation. This situation creates a tension between various regulatory goals—including financial stability, consumer protection, and monetary sovereignty—and the realities of the current market, which emphasise user acceptance of relative stability over absolute stability, alongside the ongoing need for innovation. In conclusion, the analysis sheds light on the unintended consequences of over-inclusive regulation, which may hinder rather than foster the advancement of the stablecoin market.