ECB Warns of Financial Contagion Risk from US Crypto Push, Calls for Urgent MiCA Revisions

ECB Sounds Alarm on US Crypto Expansion, Seeks Urgent Revisions to MiCA Framework

The European Central Bank (ECB) has issued a stark warning that growing US support for the crypto industry—particularly the expansion of dollar-backed stablecoins—could trigger financial instability across Europe. In a newly surfaced policy paper, the ECB is calling for urgent revisions to the recently implemented Markets in Crypto-Assets (MiCA) regulatory framework to guard against potential contagion.

The concerns stem from legislative efforts in the United States, spearheaded by President Donald Trump’s administration, to enhance the nation’s role in the global stablecoin market. The ECB fears these moves could lead to an influx of dollar-denominated stablecoins into the European Union, causing capital flight, weakening the euro, and introducing liquidity risks to European financial institutions.

European Commission Pushes Back

Despite the ECB’s concerns, the European Commission remains unconvinced that MiCA needs immediate adjustments. According to Politico, which reviewed the ECB policy paper and interviewed EU officials, the Commission believes the current regulatory framework is sufficient to handle risks associated with stablecoins.

Citing input from diplomats and EU insiders, the report noted that there was little support among member states to revise MiCA so soon after its implementation. “Not very many (countries) supported the idea that we should now jump the gun and start making quick changes,” one diplomat was quoted as saying.

MiCA was designed to provide regulatory clarity for digital assets in Europe and position the EU as a leader in crypto oversight. However, the ECB now argues that its current form is not robust enough to address a rapidly shifting international landscape influenced by emerging US policies, such as the STABLE and GENIUS acts—both aimed at expanding America’s influence in the global crypto ecosystem.

Source: Mikko Ohtamaa

Risk of Stablecoin-Induced Capital Flight

The ECB's chief concern lies in the possibility of a massive shift of European capital into US-denominated stablecoins, which could undermine the EU’s financial autonomy. The central bank warned that if redemption requests surge—especially during market stress—EU-based issuers could face liquidity crises, leading to a “run” on stablecoins and contagion throughout the banking system.

As of April 2025, the global stablecoin market is valued at $234 billion, with dollar-backed tokens like Tether’s USDT and Circle’s USDC dominating the space.

Critics Say MiCA Missed Its Opportunity

Mikko Ohtamaa, co-founder and CEO of Trading Strategy, echoed the ECB’s concerns but placed the blame squarely on the EU’s own regulatory missteps. “The worry is warranted,” he posted on X. “However, the EU had the first-mover advantage with the regulation—and they screwed it up.”

Ohtamaa argued that MiCA’s rigid requirements, shaped in part by traditional finance lobbying, have made it nearly impossible for European stablecoin projects to compete on a global scale.

Tether Pushes Back Against MiCA

Tether, the issuer of USDT, the world’s largest stablecoin by market cap, has been a vocal critic of MiCA. CEO Paolo Ardoino previously warned that MiCA’s rules—particularly the mandate that stablecoin issuers keep at least 60% of reserves in EU-based bank accounts—could expose both stablecoins and the broader European banking system to new vulnerabilities.

Tether’s noncompliance with MiCA has already had market consequences. Major European exchanges such as Coinbase, Crypto.com, and Kraken have delisted USDT in recent months to remain compliant with the EU’s evolving rules.

What’s Next?

With a growing divergence between EU institutions over the urgency of regulatory reforms, the future of MiCA is now under renewed scrutiny. The ECB’s warning adds pressure on European policymakers to reconcile financial innovation with systemic stability—especially as global competition over digital currency dominance intensifies.

Whether the EU will respond to these concerns with swift regulatory amendments remains to be seen. For now, the debate over stablecoin policy continues to expose fault lines in Europe’s approach to digital assets.