Circle Executive Flags Major MiCA Stablecoin Loophole

Circle’s top Executive, Patrick Hansen, has raised concern over a loophole in Europe’s regulatory frameworks. In a recent X post, Hansen said the problem is the unclear link between Markets in Crypto-Assets Regulation (MiCA) and the EU’s Payment Services Directive (PSD2). 

If not fixed soon, this issue could slow down euro stablecoin adoption and make the EU less competitive in the global market.

MiCA and PSD2 Overlap Could Double Rules for Crypto Firms

The European Banking Authority (EBA) has warned that firms using or issuing electronic money tokens (EMTs) may soon need two licences. This would apply to companies acting as trading platforms or custodians.

Clients would need a MiCA licence as a Crypto Asset Service Provider (CASP) and another licence under PSD2, or its updated version PSD3. This rule, expected in March 2026, could double regulations instead of simplifying them. 

MiCA, signed into law in 2023, was meant to replace the patchwork of national rules with one clear system that applies across the EU. Forcing companies to follow both MiCA and PSD2 for the same work goes against this idea. 

Hansen urged that this duplication would create legal uncertainty in the industry. At the same time add to the cost and effort of compliance. Instead of encouraging innovation, this overlap could discourage businesses from operating in Europe. This would make it harder for the EU to stay ahead in the global digital economy.

Overlapping Regulations Poise Risk to Europe’s Competitiveness

This loophole comes at a time when the EU is trying to reduce red tape and strengthen its economy. Recent reports have already called for simpler rules to help Europe keep up with global competition. Yet this overlap between MiCA and PSD2 does the opposite.

If the problem continues, crypto firms may pull back from offering euro stablecoins. Many CASPs might stop providing custody and transfer services if they must apply for another licence. This could reduce the growth of euro-backed stablecoins and push users toward unregulated crypto assets. The result would be a weaker and less competitive European market.

Calls for Clearer Rules Under MiCA and PSD3

Patrick Hansen suggests that Europe needs to coordinate its rules and give businesses enough time to adjust. Extending the transition period for CASPs until at least 2027 would prevent a sudden disruption when the rules take effect in March 2026. 

During this time, lawmakers can make sure that the upcoming PSD3 and the new Payment Services Regulation (PSR) work in harmony with MiCA. Regulators should also include clear exemptions and references so that activities already covered under MiCA are not regulated again under PSD3.