Don't Wait for Regulations to Take Effect: MiCA as a Benchmark for Bank Stablecoins

Waiting for regulations to finalize before launching stablecoins is already too late.

Written by: Stella Yeom, Ryan Yoon

Compiled by: Chopper, Foresight News

While other regions of the world are still weighing how to manage the risks of stablecoins, Europe has proactively established access requirements, reserve management rules, and redemption obligations through the Markets in Crypto-Assets Regulation (MiCA). After these rules are implemented, European banks are decisively entering the market, and their practical experiences provide reliable real-world references for regulatory authorities in regions that have yet to issue clear regulatory guidelines.

Since waiting for regulations to be fully developed before taking action is already too late, banks in countries where stablecoin rules are not yet established need to design their business models before relevant regulations are introduced.

The stablecoin business is not just about minting tokens and obtaining licenses. Before the legal framework is finalized, banks need to settle three core issues:

• First, business model: Banks must decide whether to directly issue tokens or provide related services for other issuers, such as distribution and custody;
• Second, reserve management framework: Banks must determine how to isolate and invest reserves to meet the legal requirements applicable to the issuing entity;
• Third, redemption mechanism and user protection: Banks must find ways to promptly return principal during surges in redemption requests and arrange for information disclosure.

The reference standard for these three decisions is the MiCA rules for Electronic Money Tokens (EMT), which anchor stablecoins pegged to fiat currency.

This article outlines how the EU regulates EMT issuance and supporting services, while providing preparatory steps that banks can undertake during the regulatory gap. Each decision is developed according to a unified logic: core issues to be settled now, corresponding MiCA provisions, and work that banks can implement in advance. Since MiCA only defines the legal boundaries without stipulating banks' business models or monetization strategies, this report draws on European precedents to clarify the decisions banks outside the EU need to make before their own regulatory frameworks are established.

First Decision: Direct Issuance or Only Providing Supporting Services

The issuance business structure takes precedence over technical development. In the EU, only Electronic Money Institutions (EMIs) can issue EMTs. EMIs are institutions that allow users to pre-deposit funds into electronic wallets and other accounts for payments and transfers. Besides direct issuance by banks, banks can also establish independent subsidiaries to apply for EMI licenses, allowing the subsidiary to issue EMTs.

Both types of licenses support stablecoin issuance, but the corresponding legal and capital requirements differ significantly. Banks need to prioritize establishing governance structures: whether to have the bank itself issue directly or have a subsidiary issue depends on business objectives—whether to isolate the parent company to avoid regulatory risks or to leverage the bank's traditional credit backing to conduct business.

Before issuing stablecoins, a white paper on crypto assets must be published, similar in specification to a financial product prospectus. If the white paper is not drafted and reviewed from both financial and legal perspectives to clarify the token's legal structure, reserve asset management methods, and risks faced by token holders, even if the technical system is built, the commercialization phase will require significant rework.

Additionally, a user fund redemption process must be established in advance, along with a profitable model that can cover redemption costs. Article 49 of MiCA stipulates that issuers must redeem EMTs at face value when token holders make requests. In principle, charging redemption fees is prohibited, and the conditions for redemption must be clearly stated in the white paper. This means that funds received by the issuer cannot be directly recognized as income; even in the event of concentrated redemptions, the issuer must ensure sufficient cash is available to complete the redemptions.

Banks can also earn revenue without issuing their own stablecoins by relying on stablecoin-related services. MiCA does not mandate that banks must issue their own stablecoins to engage in stablecoin business. According to Article 60, banks can provide custody, transfer, and fiat exchange services for tokens issued by third parties and charge service fees.

However, the scope of business that different institutions can undertake varies. After completing pre-reporting, banks can undertake third-party token-related businesses; however, EMIs, even after reporting, can only provide custody and transfer services for their own issued EMTs. To handle third-party tokens, EMIs must additionally apply for Crypto Asset Service Provider (CASP) qualifications. Therefore, if banks plan to offer multi-currency services, they need to weigh whether to conduct business directly through the parent company or apply for additional qualifications for the subsidiary, and assess the cost-benefit of both options.

They also need to check for overlaps in regulatory requirements. Transferring tokens on behalf of users falls under both MiCA's crypto asset transfer services and may also fall under the revised Payment Services Directive (PSD2). A banking license does not exempt banks from PSD2 requirements, such as Strong Customer Authentication (SCA), liability for unauthorized transactions, and transaction errors. Banks need to conduct prior reviews to ensure compliance with existing financial regulations.

The fee structure and breakeven point for transfer services must also be calculated in advance. MiCA requires crypto asset transfer service providers to specify transfer methods, security mechanisms, fee standards, and applicable laws in customer agreements, and to publicly disclose pricing strategies on their official websites.

Banks must test during the planning phase whether the set fees can cover operational costs: the transaction fee must be calculated after deducting system operation, labor costs, strong identity verification, fraud detection system (FDS), and compliance costs for emergency responses to determine real profitability.

Since charging fees for redeeming fiat currency is generally prohibited, banks must separate the accounting for chargeable transfer services and free redemption processes to assess profitability levels.

Second Decision: Reserve Management Matching the Regulatory Qualifications of the Issuing Entity

Banks need to first determine the issuing entity before planning the management scheme for user funds. MiCA treats EMTs as electronic money, while the Electronic Money Directive applies to situations not specifically addressed by MiCA. However, the rules will vary depending on whether the issuing entity is a bank or an EMI: if a bank issues directly, it continues to follow the banking regulatory framework; if an EMI issues, it must meet separate user fund protection requirements. Banks preparing for business must determine from the outset: which entity will issue, what type of license will be held, and who will bear the redemption responsibility to users.

Banks need to determine the channels for storing user funds and the allocation ratios, calculating the feasibility of the business based on real yield rates and management costs. Article 54 of MiCA stipulates that EMIs issuing EMTs must store at least 30% of the received user funds in segregated accounts at other banks; the remaining funds can only be invested in low-risk, high-liquidity assets of the same currency. This 30% deposit requirement does not apply if the bank issues directly.

If a bank issues through an EMI subsidiary, it must develop a funding allocation plan in advance, balancing the 30% liquidity deposit, low-risk asset returns, and account operation costs. Even if local regulations have not yet been implemented, banks can use MiCA's 30% segregated deposit requirement as a benchmark to conduct profitability pressure tests for different issuance structures.

Not all stablecoins need to be subject to the highest level of regulation, but costs need to be estimated in stages. According to MiCA's classification rules in Article 56, the European Banking Authority (EBA) will only recognize a stablecoin as an

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