Fragmented Stablecoin Rules Raise Costs, Favor Big Issuers

Published: 2025-08-13 09:17:50 |

Stablecoin regulation remains fragmented across Europe’s Markets in Crypto-Assets (MiCA), the US GENIUS Act and Hong Kong’s stablecoin framework. This stablecoin regulation divergence forces stablecoin issuers to set up parallel legal entities, audits and governance models and inflates compliance costs. Each regime imposes different issuer licensing, reserve requirements and KYC procedures. MiCA allows non-bank issuers under the European Banking Authority, while the GENIUS Act limits issuance to banks and federal entities. Hong Kong’s rules demand strict HKMA licensing and wallet-level KYC. Operational friction advantages large, capitalized issuers and risks sidelining smaller projects or driving consolidation. Growing cross-border adoption and deeper integration of stablecoins into payments and capital markets have increased pressure for regulatory convergence. Market observers and crypto traders await action from global bodies such as the Financial Stability Board (FSB), the Bank for International Settlements (BIS) and the G20 to define common reserve, disclosure and anti-money laundering (AML) standards. However, regulators may continue to use stablecoin rules for economic diplomacy, prolonging fragmentation in the medium term.

Neutral

Regulatory fragmentation of stablecoin rules is likely to have a neutral overall impact on the broader cryptocurrency market. In the short term, divergent reserve, licensing and KYC requirements across MiCA, the GENIUS Act and Hong Kong raise compliance costs and operational challenges for stablecoin issuers. This could restrict supply growth among smaller projects and increase market fragmentation, potentially weighing on liquidity. Larger, capitalized issuers stand to gain economies of scale, but traders should watch for split liquidity pools. In the longer term, mounting pressure for global harmonization – driven by bodies like the FSB, BIS and G20 – may lead to unified standards for reserves, disclosures and AML. Such convergence could restore efficiency, enhance cross-border stablecoin use and support market stability, balancing early frictions. Overall, these opposing forces suggest a neutral view for stablecoin-driven market dynamics.