Banks Are No Longer Waiting for Regulation: How Europe's MiCA Becomes the Stablecoin Implementation Standard?

Author: Stella Yeom (Tiger Research)

Compiled by: TechFlow

TechFlow Editor's Note:In the evolving landscape of global crypto regulation, stablecoins are accelerating from the regulatory gray zone into the core of the modern banking system. For a long time, traditional financial institutions in most countries and regions have taken a wait-and-see approach to crypto assets, treating 'regulatory rules have not yet been finalized' as a safe harbor for delaying deployment. However, the implementation of the EU's Markets in Crypto-Assets Regulation (MiCA) has fundamentally rewritten this passive game-theoretic logic.

European banks did not wait for an idealized regulatory utopia. Instead, relying on the clear compliance boundaries MiCA sets for e-money tokens (EMTs) and asset-referenced tokens (ARTs), they took the lead in building a multi-track paradigm that includes commercial banks issuing directly, establishing e-money institution (EMI) subsidiaries to issue tokens, and providing infrastructure custody and distribution services.

Asian think tank Tiger Research, in this in-depth report, analyzes three core pre-decisions under the MiCA framework: governance architecture selection for issuing entities, the 30% segregated deposit requirement and high-liquidity reserve asset allocation, and whitepaper review and crisis liquidation/redemption mechanisms that impose statutory responsibility on management.

This report not only provides banks in jurisdictions still facing regulatory ambiguity with a practical roadmap for early preparation, but also reveals a harsh market rule: by the time the regulation takes effect, the starting line is no longer the same. Only institutions that complete compliance testing and network buildout ahead of time can win the endgame in the trillion-dollar on-chain settlement race.

Key Takeaways

While financial institutions that have been waiting for final regulation are still weighing whether to enter the market, banks that completed their business architecture early have already secured enterprise payment networks and created a gap that latecomers find difficult to overcome. European banks that acted swiftly once the rules were established have now firmly taken first-mover dominance in the market.

Waiting until legislation is formally passed to begin business reviews is too late. Only banks that have finalized their business models—whether direct issuance by the parent bank, issuance through subsidiaries, or serving as infrastructure service providers—and rigorously assessed the 30% segregated deposit requirement and regulatory compliance costs at each stage can launch services smoothly on the first day the law takes effect.

Without a whitepaper review mechanism backed by joint and several legal liability of management, and without a pre-established comprehensive redemption and crisis recovery plan, even if the license application channel officially opens, the product launch date will be postponed indefinitely.

On the day regulation officially takes effect, banks will not stand at the same starting line. While banks passively waiting for final legislation scramble to prepare basic application materials, banks that have completed profitability analysis and finalized external partnerships using MiCA as the benchmark can already capture real transaction flows immediately.

Regulation opens an equal door for all banks, but market share will flow only to the first movers who complete preparation ahead of others.

Why Look to Europe

While other regions around the world are still repeatedly weighing how to manage stablecoin risks, Europe has already enacted the Markets in Crypto-Assets Regulation (MiCA), establishing market entry thresholds, reserve management rules, and statutory redemption obligations.

Once the regulatory framework was clearly implemented, European banks entered this market decisively. Their practical experience has also become the most compelling real-world reference model for regulators in countries and regions that have not yet issued clear regulatory guidance.

Given that waiting until regulation is fully finalized before acting will inevitably result in lost first-mover advantage, commercial banks in countries and regions where stablecoin rules remain unclear must design their business models in advance, before the relevant rules are formally introduced.

Conducting a stablecoin business is far more than simply minting tokens and obtaining a license. Before the law is finalized, banks need to prepare thoroughly around three core decisions.

First is the business model decision: banks must decide whether to issue tokens directly themselves or provide derivative infrastructure services such as distribution and custody for other issuers.

Second is the reserve management framework: banks must determine how to segregate and invest reserve assets so as to fully meet the statutory regulatory requirements applicable to the issuing entity.

Third is the redemption mechanism and customer protection: banks must develop detailed operational plans to ensure prompt principal repayment to customers during surges in redemption requests and establish a standardized information disclosure framework.

The common benchmark reference for these three core decisions is precisely the regulatory framework MiCA establishes for e-money tokens (EMTs, the stablecoin category pegged to fiat currencies).

This report provides an in-depth analysis of how Europe regulates the issuance of electronic money tokens (EMTs) and related services, and outlines practical preparations that commercial banks can begin immediately during the regulatory gap. For each decision, we follow a consistent logic: the core decision currently required, the relevant specific provisions of MiCA, and the preparatory actions banks can take in advance.

Because MiCA only sets legal boundaries and does not choose business models or monetization strategies on behalf of banks, early European precedents are used here as a scenario simulation to systematically explain the key choices that banks outside the EU must resolve one by one before local regulation is enacted.

Primary decision: direct issuance or providing only necessary services

Figure: Comparison of the two-track structures for direct bank issuance and issuance through an EMI subsidiary

Top-level architecture design for issuance operations takes precedence over underlying technology selection.

Within the EU, only commercial banks and electronic money institutions (EMIs) are authorized to issue EMTs. An EMI is a company that allows customers to make payments or transfers using funds loaded into an electronic wallet or similar account. In addition to issuing directly through the parent bank, a bank may establish an independent subsidiary, apply for an EMI license for it, and issue EMTs through that entity.

Both licenses allow stablecoin issuance, but the associated legal compliance and capital adequacy requirements differ fundamentally.

Therefore, banks must first establish a corporate governance framework and decide, based on their strategic intent, whether to issue directly through the parent bank or through a subsidiary: whether they want to fully ring-fence the parent bank from potential prudential regulatory risk, or leverage the parent bank's deep, stable traditional banking reputation and infrastructure advantages to enter the market.

Before formal issuance, the stablecoin must also publicly publish a crypto-asset white paper, a strict disclosure document equivalent to a prospectus for traditional financial products. Unless this white paper, covering the token's legal structure, issuance and redemption terms, and related risks, has been completed and approved by the competent authority, the stablecoin may not be offered to the public or listed on any trading platform.

Figure: Core redemption-mechanism and commercial-revenue-model processes to be finalized before the crypto-asset white paper is published

Before drafting the white paper, banks must design in advance the redemption process used to return funds to customers, as well as a commercial profitability model sufficient to cover operating costs.

Under Article 49 of MiCA, whenever a token holder requests redemption, the issuer must redeem the tokens in full at par value at any time. No additional fees may be charged for redemption beyond actual necessary costs, and those costs must be fully disclosed in advance in the white paper.

Therefore, before drafting the white paper, the issuer must rigorously review redemption fees and clearing and settlement channels internally, and design a sustainable revenue model that does not rely on exit fees.

Figure: Stablecoin custody, distribution, and circulation service models that commercial banks can enter without issuing tokens themselves

Commercial banks can still earn substantial returns by providing ancillary services even if they do not issue stablecoins themselves.

MiCA does not require banks to issue their own stablecoins in order to participate in the stablecoin business. Banks may act as crypto-asset transfer service providers, sending and receiving tokens on behalf of clients, or as custody service providers, securely holding token private keys.

Through these services, banks can handle large volumes of client transactions and earn stable fee income while avoiding the heavy capital and reserve regulatory burdens that fall directly on issuers.

However, the permitted scope of business differs significantly by institution type. Commercial banks can directly provide transfer and custody services under their existing banking licenses, subject only to regulatory compliance notification.

By contrast, EMIs may provide custody services only for EMTs they issue themselves, and may provide transfer services only when the transfers meet the payment-service criteria defined in the relevant directive.

In addition, overlap with the traditional payment regulatory framework must be carefully reviewed. Transferring tokens on behalf of clients is subject not only to MiCA but also to traditional payment-services regulation.

Therefore, banks must verify in advance whether their intended services meet the legal definition of payment execution under the EU Payment Services Directive 2 (PSD2), and whether additional compliance filing procedures are required.

Figure: Overlap and compliance interfaces between stablecoin token transfer services and the traditional payment regulatory framework (PSD2)

The fee structure and break-even point for token transfer services must be modeled carefully in advance.

Under the MiCA framework, crypto-asset transfer service providers must clearly specify in customer service agreements the fee charged for each transfer and the specific execution timelines. If fees are set too high, customers will bypass the bank and use native ordinary on-chain transfers; if fees are set too low, the bank will be unable to cover underlying blockchain network gas fees and system hardware and software operations and maintenance costs.

Therefore, banks must conduct stress tests during the initial project planning stage to verify whether the fee structures they set for enterprise payments and cross-border remittances can adequately cover network transaction friction costs and routine operating expenses.

Since the redemption of stablecoins into fiat currency is prohibited in principle by law from charging any additional fees, banks must also draw clear operational boundaries between transfer services for which fees may be legally charged and redemption services for which fees are absolutely prohibited, so as to avoid building a business model on a fee logic that may later be deemed unlawful by regulators.

Reserve Management Decisions: Aligning with the Regulatory Status of the Issuing Entity

Chart: Reserve management rules and applicable legal frameworks corresponding to the regulatory statuses of different issuing entities

Before deciding how to manage customer funds, banks must first determine the specific regulatory rules applicable to the issuing entity.

Article 48 of MiCA explicitly treats EMTs as electronic money, and the European Electronic Money Directive (EMD) applies directly to any aspects not specifically addressed by MiCA.

However, reserve management rules differ significantly depending on the issuer's legal organizational form. Commercial banks that issue directly may manage customer funds collectively under their existing banking supervisory framework; but if stablecoins are issued by an EMI subsidiary, customer funds must be fully segregated from the issuer's own assets from the first day the funds are received and may be invested only in low-risk assets with very high safety and high liquidity.

Chart: Requirements for 30% segregated deposits and high-liquidity safe asset allocation ratios when electronic money institutions (EMIs) issue stablecoins

Banks must prudently plan where customer funds are deposited and their allocation ratios, and conduct precise feasibility calculations for the business in light of the macro interest rate environment.

Under the strict requirements of Article 54 of MiCA, electronic money institutions issuing EMTs must keep at least 30% of the funds raised in a separate segregated account with a qualified credit institution (commercial bank). The remaining funds may be invested only in safe, low-risk assets, such as government bonds denominated in the same currency to which the EMT is pegged.

In a low interest rate environment, interest income from bank deposits and government bonds may be insufficient to cover high ongoing compliance and operating costs; when market interest rates rise, the difficulty of managing portfolio duration and liquidity risk increases significantly.

Therefore, before finalizing a reserve investment portfolio strategy, banks must conduct comprehensive profit simulations for different interest rate paths.

Banks that issue through an EMI subsidiary must develop a detailed asset allocation strategy in advance, fully considering the credit concentration risk of deposit counterparties.

Chart: Core quantitative assessment criteria used by the European Banking Authority (EBA) to determine 'Significant EMTs'

Not all stablecoins are subject to the most stringent regulatory requirements immediately upon launch, but compliance costs must be estimated on a phased, tiered basis.

Under Article 56 of MiCA, if a stablecoin reaches specific quantitative thresholds in dimensions such as market capitalization, number of token holders, or average daily transaction volume, the European Banking Authority (EBA) will formally classify it as a 'Significant EMT'.

Once classified as such, the stablecoin will face stricter own funds adequacy requirements, more intensive reserve supervisory reviews, and direct comprehensive supervision by the EBA.

Among the 45 EMTs currently notified to EU regulators, USDC is so far the only asset that meets the above criteria for designation as a Significant EMT.

However, once classified as a Significant EMT, the regulatory burden increases dramatically. The minimum reserve ratio that must be held in a separate deposit account with a commercial bank rises directly from 30% to 60%, tying up a large amount of highly liquid cash positions and severely limiting the investment options for the remaining reserves.

At the same time, the minimum own funds requirement that the issuer must hold will jump sharply from 2% of the average value of reserve assets for ordinary EMTs to at least 3%.

Therefore, banks' financial profit and loss models must be designed in a phased, stepped manner, strictly separating the minimum compliance costs in the product's initial stage from the heavy capital obligations that arise after scale expansion.

Figure: Stepwise escalation ladder for capital adequacy and compliance costs of significant stablecoin issuers as business scale expands

When selecting an issuing entity, banks must incorporate upfront the potential subsequent costs of significant asset classification, capital calls, and comprehensive risk management.

Under Article 58 of MiCA, electronic money institutions issuing significant EMTs must hold own funds equivalent to at least 3% of average reserve assets and are subject to additional liquidity buffer and risk management requirements.

If a commercial bank chooses to issue indirectly through an EMI subsidiary, as issuance volume expands rapidly, the subsidiary itself must independently meet this capital threshold, forcing the parent bank to continuously inject large additional capital.

By contrast, direct issuance by a commercial bank is exempt from the above additional own funds obligations under Article 58(1). Banks can directly reuse their existing prudential capital adequacy framework and risk control systems, making direct issuance by the parent bank an attractive strategic path worthy of focused assessment from the outset.

Redemption Mechanism and Customer Communication Decisions: Integrated Design of Compliance Processes

Figure: On-demand par redemption process for electronic money token holders under the MiCA framework and customer guidance standards

Banks must integrate redemption operating procedures with front-end customer guidance to ensure that customers submitting redemption requests clearly understand the full process expectations and can recover fiat funds without delay.

Under the strict requirements of Article 49 of MiCA, EMT holders have the right to request full redemption at par value from the issuer at any time. The issuer must execute the redemption immediately and without delay, and may not impose any additional restrictions or charge any fees beyond the actual costs disclosed in advance.

Operationally, commercial banks must define clear standards and responsible personnel for each specific step from receipt of a redemption request to final transfer of fiat currency.

At the same time, banks must clearly explain the redemption mechanics in customer-facing front-end interfaces to prevent customers from mistakenly treating stablecoins as traditional bank deposits fully protected by deposit insurance.

Figure: End-to-end redemption process node breakdown and role-based responsibility matrix

Whitepapers and front-end business interfaces must accurately and comprehensively explain the product's true legal nature and asset protection scope, leaving no room for public misunderstanding.

Article 51 of MiCA expressly requires that whitepapers disclose detailed issuer information, the underlying token architecture, holders' redemption rights, and key risks, and emphasizes that all marketing communications must be fully consistent with the whitepaper.

In addition, all promotional materials must clearly warn in the most prominent wording that the token is not a bank deposit and is not covered by any statutory national deposit guarantee scheme.

Product names and external marketing copy must also undergo rigorous compliance review, and any misleading implication of deposit insurance protection is strictly prohibited. If regulators determine that a bank's promotional materials contain misleading statements, the bank will not only face substantial administrative penalties but also direct exposure to large civil damages claims from token holders.

Figure: Key compliance review points for crypto-asset whitepapers and red lines for product marketing compliance

Banks must clearly determine who reviews and approves the truthfulness and accuracy of whitepaper content, and must fully archive and retain evidence records of the entire approval chain.

Under Article 52 of MiCA, if token holders suffer financial losses due to false statements, misleading statements, or material omissions in a whitepaper, management is directly subject to statutory joint and several liability. Liability attaches personally to members of administrative, management, or supervisory bodies, not merely to the company concerned.

In the event of material losses, investors have the right to bring civil tort claims directly against individual members of management and supervisory boards. More critically, this statutory personal joint and several liability cannot be excluded or limited in advance through any commercial contract or service disclaimer.

For this reason, commercial banks must establish in advance a coordinated multi-department internal control approval governance mechanism, assigning compliance sign-off responsibility for each whitepaper section precisely to functional departments: the operations department signs off on the completeness of redemption processes, the treasury and funding department signs off on liquidity and reserve asset allocation strategies, and the legal and compliance department vets the redemption obligor entity and legal compliance risks.

The review bases and approval workpapers for each business line must be systematically archived for reference, and a routine dynamic monitoring mechanism must be established. If any material adjustment occurs in the underlying operational systems or service agreement terms, the disclosure wording in the whitepaper must be updated accordingly.

Figure: Comparison of the Recovery Plan architecture for addressing crisis liquidity shocks and the Redemption Plan architecture for orderly business termination and liquidation.

Banks must simultaneously develop a Recovery Plan to resolve acute bank-run crises and a Redemption Plan for the orderly termination, liquidation, and exit of business.

Article 55 of MiCA requires every EMT issuer to continuously develop and maintain crisis recovery plans and liquidation redemption plans.

The Recovery Plan details how an issuer can rapidly secure emergency liquidity and restore normal day-to-day operations in the event of sudden liquidity crises such as large-scale concentrated redemption runs.

By contrast, the Redemption Plan covers an orderly wind-down process upon business termination: when a regulator determines that the issuer can no longer maintain normal operations, or when the project must be voluntarily shut down, all reserve assets must be promptly liquidated and disposed of, and the remaining funds must be returned in full to all token holders on a fair basis.

This means that what banks need is far more than a crisis recovery manual covering emergency financing channels and contingency decision-making processes.

They must also design, in advance and for the worst-case scenario, a complete liquidation and shutdown plan: an emergency response mechanism capable of accurately calculating each customer's asset share in real time, rapidly disposing of and monetizing assets, fairly distributing liquidation assets, and completing comprehensive disclosure to affected customers in accordance with applicable law.

Preparatory steps banks can undertake without waiting for regulatory finalization

The preceding section used Europe's MiCA as a baseline framework to systematically review the compliance capabilities commercial banks need for stablecoin issuance, reserve asset management, and end-to-end redemption handling. MiCA provides a clear reference point for countries and regions still refining their local regulatory rules, but in practice, specific business operations must ultimately comply with the local laws and regulations finally enacted in the relevant jurisdiction.

However, this does not mean banks should passively wait for local legislation to be finalized before taking action: before laws formally enter into force, there are many critical areas with clearly defined boundaries in which banks can immediately begin feasibility assessments and preparatory positioning.

The first task is to conduct an objective and pragmatic quantitative cost-benefit comparison against the traditional financial system.

Banks must use detailed data to validate the specific benefits that stablecoins can bring to customers and to the banks themselves. Specifically, they need to precisely quantify how stablecoins compare with traditional SWIFT-based cross-border wire transfer networks in terms of fee savings and shortened settlement times, and thoroughly calculate whether, after deducting the costs of building underlying software and hardware systems and long-term operational compliance, banks can retain a genuine net interest margin.

This work will outline the initial framework of the entire business and help banks identify the target customer segments to focus on first, such as B2B bulk cross-border trade settlement or small-value, high-frequency cross-border remittance scenarios.

The second task is to conduct an in-depth assessment of business model viability: independent self-issued issuance, consortium issuance, or pure distribution and circulation.

The choice of business model must be strictly anchored to expected return on investment and profitability. Commercial banks may issue stablecoins independently through the parent bank, act as infrastructure distributors reselling and circulating already mature compliant tokens in the market, or form a joint issuance consortium with other commercial banks.

In Europe, multiple well-known financial institutions are advancing the joint issuance of a euro stablecoin through the Qivalis consortium. This consortium model effectively spreads the heavy development and maintenance costs of underlying infrastructure and statutory redemption architecture, while giving each bank sufficient flexibility to focus on developing differentiated financial services through its own customer-facing front ends.

The third task is to validate real business pain points as early as possible and proactively secure cross-border payment partnerships.

Commercial banks have no need to wait for final legislation; they can now proactively engage core customer groups with high-frequency cross-border fund transfer needs—such as import/export enterprises, cross-border e-commerce companies, and fintech firms—and precisely identify their settlement pain points.

Banks can use practical models to intuitively demonstrate to these customers the time and cost savings enabled by stablecoins, and begin substantive strategic partnership discussions early with local clearing banks and regulated payment institutions in target overseas markets.

When regulators formally finalize the rules, banks will not all start from the same starting line.

Banks that have prepared thoroughly against the mature and comprehensive MiCA framework and have fully validated real customer demand and a closed-loop profitability model can transition seamlessly to full-scale execution; banks that passively wait for final implementing rules to be issued will only then begin scrambling to launch projects and prove out business models.

A finalized regulatory framework may nominally open its doors equally to all banks, but it can never return to latecomers the time lost or the first-mover market share already firmly secured by early movers.

Rather than letting opportunities erode during a prolonged wait, the wisest strategic decision for commercial banks today is to use mature mainstream frameworks such as Europe's MiCA as a benchmark, immediately verify genuine customer demand, stress-test business models, and build out the ecosystem infrastructure network essential for winning the future of on-chain finance.

Source: TechFlow