📢MiCA vs GENIUS ACT: A COMPARATIVE ANALYSIS OF EMERGING STABLECOIN FRAMEWORKS

With the introduction of Senator Bill Hagerty’s GENIUS Act, co-sponsored by Senators Tim Scott, Kirsten Gillibrand, and Cynthia Lummis, the United States is making strides toward a comprehensive stablecoin regulatory framework. The bill establishes clear requirements for payment stablecoins, mandating full licensing and high-quality liquid asset reserves while explicitly prohibiting algorithmic stablecoins.

On the other side, MiCA which took effect in 2024, already provides a comprehensive framework for stablecoin issuers under Titles III-IV. MiCA governs Electronic Money Tokens (EMTs) which are stablecoins pegged to fiat) and Asset-Referenced Tokens (ARTs) which are backed by multiple assets such as commodities or baskets of currencies.

Both regulatory approaches aim to enhance financial stability and consumer protection while fostering innovation—but they take different paths in achieving these objectives.

Key Strengths of the GENIUS Act

1. Flexibility for Tokenised Collateral

One of the most notable features of the GENIUS Act is its implicit openness to tokenised collateral for stablecoins.

This could have far-reaching implications:

• Issuers could back stablecoins with tokenised U.S. Treasuries, central bank reserves, and digitised sovereign debt, increasing liquidity and capital efficiency

• This approach would strengthen demand for U.S. government securities, reinforcing the dollar’s global dominance

• Unlike MiCA, which limits stablecoin backing to traditional financial assets, the GENIUS Act provides greater flexibility, allowing for market-driven collateral innovations

2. Hybrid Federal-State Regulatory Model

The GENIUS Act allows issuers to be licensed at either the state or federal level, depending on their size:

• Smaller issuers (<$10B in circulation) can operate under state banking laws

• Larger issuers would require federal oversight (Federal Reserve and OCC) to mitigate systemic risks

  
  

This dual licensing structure introduces elements of narrow banking, similar to Milton Friedman’s vision in A Program for Monetary Stability:

• 100% reserve requirements eliminate credit risk, reducing financial instability

• Stablecoin issuers function as money warehouses, ensuring full liquidity at all times

• Reduces systemic financial risks by restricting stablecoin issuers from engaging in lending

The potential state-level competition could lead to diverse regulatory models, fostering innovation in stablecoin issuance.

Key Strengths of MiCA

1. Comprehensive Consumer Protection & Market Stability

Unlike the GENIUS Act, MiCA is a fully harmonised EU-wide framework, ensuring that:

• Stablecoin issuers meet strict prudential requirements, minimising risk exposure

• EMTs must be 1:1 backed with the fiat currency they reference, ensuring price stability

• ARTs require diversified reserves, preventing over-reliance on a single asset class

• Large-scale stablecoins face additional oversight under the MiCA Significance Regime, reducing systemic risk

  
  

By establishing clear governance requirements and banning algorithmic stablecoins, MiCA reduces the risk of another Terra/Luna-style collapse.

2. Regulatory Clarity & Institutional Adoption

   
   

MiCA offers legal certainty for stablecoins across all 27 EU member states, making it easier for banks, fintech firms, and institutional players to engage with digital assets. The GENIUS Act, in contrast, could lead to state-level fragmentation and regulatory uncertainty.

3. Integration into the Traditional Banking System

   
   

Unlike the GENIUS Act, which encourages a narrow banking model, MiCA integrates stablecoins into the existing financial system:

• EMTs can only be issued by banks or authorised electronic money institutions (EMIs)

• Large ART issuers face additional reserve and capital requirements, ensuring financial resilience

• The European Banking Authority (EBA) and National Competent Authorities (NCAs) actively monitor systemic risks

  
  

By ensuring that stablecoin issuers follow traditional financial safeguards, MiCA prioritises stability over experimentation.

Comparing the Regulatory Trade-offs

Regulatory Aspect	MiCA (EU)	GENIUS Act (US)
Scope	Covers EMTs and ARTs, explicity bans algorithmic stablecoins	Focused on payment stablecoins. excludes algorithmic stablecoings
Regulatory Model	Harmonised EU-wide framework	Hybrid (State & Federal Licensing)
Reserve Requirements	1:1 backing EMTs, diversified reserves for ARTs	100% reserves, prohibiting rehypothecation
Issuer Eligibility	Banks and authorised EMIs for EMTs while ART issuers face additional requirements	Banks, Trust Companies and selected Non-Bank Financial Institutions
Market Innovation	Ensures consistency while imposes compliance burdens on smaller players	Support tokenised collateral and fosters state-level regulatory competition
Cross-Border Access	Non EU issuers must register with an EU Regulator	Foreign issuers must register in the US
Monetary Oversight	ECB and EBA monitor systemic risk under the Significance Regime	Federal Reserve oversight for larger issuers

Final Thoughts: Innovation vs Stability

Both MiCA and the GENIUS Act take important steps in shaping the stablecoin market, but they do so with different priorities:

• The GENIUS Act encourages financial innovation, potentially leading to narrow bank-style stablecoin issuers and new collateral models. However, it may lack the regulatory cohesion of MiCA and introduce state-level inconsistencies

• MiCA prioritises financial stability, ensuring that stablecoins integrate into the existing banking system. It offers clear consumer protections and institutional legitimacy, but at the cost of rigid compliance requirements that may stifle smaller innovators

The choice between these two frameworks depends on whether regulators and market participants prioritise innovation, competition, and decentralisation—or uniformity, stability, and integration into traditional finance. As stablecoins continue to evolve, the contrasting approaches of the U.S. and EU may shape the global landscape for digital money. Which model will ultimately prove more effective remains to be seen.

For further insights or assistance in navigating stablecoin regulations and their implications for your business, feel free to reach out. Contact us at info@pelaghiaslaw.com to discuss how these evolving frameworks impact your strategy and compliance requirements.