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The Genius Act and MiCAR represent two radically different approaches to regulating stablecoins, with the United States betting on deregulatory expansion and the European Union doubling down on sovereignty and oversight. But is the Genius Act really that smart?
As stablecoins emerge as tools of financial infrastructure and geopolitical leverage, understanding the regulatory divide between the Genius Act and MiCAR is critical for any player in the digital asset space.
The Rise of Stablecoins and the Battle for Monetary Sovereignty
Stablecoins are quickly transitioning from speculative crypto-assets to core infrastructure for cross-border payments and digital finance. In this evolving environment, two heavyweight jurisdictions—the United States and the European Union—are setting the tone for global regulation. The US Genius Act, signed into U.S. law on July 18, 2025, embraces a deregulatory and expansive framework. Meanwhile, the EU Markets in Crypto-Assets Regulation (MiCAR), in force across the EU since July 2024, is a calculated attempt to safeguard monetary sovereignty through supervision and public law.
This divergence in regulatory philosophy goes beyond finance—it reflects how each jurisdiction views the future of money and state power in a digitized world.
The Genius Act and the Rise of Cryptomercantilism
Described as “cryptomercantilism” by a 2025 European Parliament study, the Genius Act reflects a deliberate U.S. policy to project the dollar into the digital sphere. It is based on the idea that dollar-pegged stablecoins can reinforce U.S. economic influence, especially in markets underserved by traditional banking infrastructure. The Act enables global issuance of stablecoins by banks and non-bank entities alike, including fintechs and tech giants, while allowing reserve holdings in a broad mix of U.S. dollar assets—especially Treasuries.
This framework serves dual goals. First, it embeds the dollar in digital economies around the world, including emerging markets where U.S.-based firms promote stablecoins as financial inclusion tools. Second, by requiring stablecoins to be backed by U.S. assets, it increases global demand for U.S. debt.
Importantly, the Genius Act imposes no geographic restrictions. It supports the global expansion of U.S.-issued stablecoins and incentivizes their integration into tech platforms through loyalty programs, cashbacks, and seamless app integration. In the words of the 2025 EP Study, this turns monetary policy into a competitive export.
MiCAR as Monetary Firewall: A Defensive but Strategic Model
The EU’s MiCAR framework adopts a diametrically opposed strategy. Rather than supporting unregulated expansion, it positions stablecoins within the bounds of public oversight. MiCAR permits only licensed credit or e-money institutions to issue stablecoins, imposes strict reserve requirements, and grants the European Central Bank (ECB) the power to intervene when monetary stability is at risk.
The regulation contains tools to block the circulation of foreign stablecoins that exceed transaction volume or value thresholds. Moreover, it centralizes supervision in the hands of the European Banking Authority (EBA) and national regulators, ensuring a coordinated response to systemic risks.
While MiCAR may appear restrictive, it is not protectionist for its own sake—it is a carefully crafted shield against digital dollarisation, disintermediation of EU banks, and the erosion of the euro’s international standing.
Regulatory Divergence in Practice
When comparing the Genius Act and MiCAR, several key differences emerge. The U.S. framework allows greater flexibility in who can issue stablecoins and what assets can be used for reserves. It offers minimal supervisory intervention unless there is a failure. It lacks a tiered approach to systemic risk, applying uniform rules regardless of scale or market share.
MiCAR, by contrast, is built around risk stratification. Issuers deemed “significant” are subject to heightened scrutiny and obligations. Redemption mechanisms are tightly controlled, and the ECB is empowered to act preemptively. While the Genius Act aims to encourage global usage of stablecoins to strengthen the dollar’s position, MiCAR seeks to limit such exposure and defend EU monetary autonomy.
These differences are not merely technical—they are constitutional. The Genius Act assumes that market dynamics and private incentives can safely shape the future of money. MiCAR insists that money remains a public good, governed by laws, not algorithms.
Systemic Risks of the Genius Act
Critics of the Genius Act, including European policymakers and academics, warn of significant systemic risks. First, even fully collateralized stablecoins can become unstable during market stress, particularly if their reserves are opaque or illiquid. Depegging incidents—such as those involving Tether and Circle—have already demonstrated how quickly trust can unravel.
Second, widespread use of U.S. dollar stablecoins in the EU could accelerate de facto digital dollarisation. This would expose EU residents and institutions to foreign exchange volatility and reduce the ECB’s ability to control monetary policy effectively. Third, allowing non-EU issuers to operate without licensing could open gaps in anti-money laundering (AML) and counter-terrorist financing (CTF) compliance.
MiCAR addresses these vulnerabilities with a dual safeguard system: quantitative thresholds that trigger regulatory oversight, and discretionary powers allowing the ECB to ban foreign-pegged tokens that threaten financial stability. This makes MiCAR not just a financial law, but a mechanism of economic defense.
A Sovereign Digital Future: Europe’s Broader Strategy
MiCAR is only one pillar of the EU’s broader strategy for digital monetary sovereignty. At the center of this vision lies the digital euro—a central bank-issued digital currency designed to maintain public trust in state-backed money. The digital euro is not a competitor in the global stablecoin market; it is a domestic safeguard intended to ensure resilience, privacy, and democratic accountability in digital payments.
Alongside this, the EU has made it clear that it will not dilute its regulatory standards to attract foreign issuers. MiCAR’s high compliance thresholds and strict licensing regime send a strong message: regulatory consistency is a form of strategic autonomy. In this, Europe diverges sharply from the regulatory arbitrage mindset underpinning the Genius Act.
Finally, the EU is actively pushing for international alignment via multilateral platforms like the FSB and IOSCO. Its aim is not to export MiCAR wholesale, but to embed its principles—on reserve backing, consumer protection, and central oversight—into global norms. Where the Genius Act promotes competitive deregulation, Europe champions principled convergence.
The Future of Money: Genius or Hubris?
Framed as a leap forward, the Genius Act might also be seen as a calculated risk. It assumes that private actors can safely issue global money—a premise that history and recent crypto failures challenge. By ignoring systemic differentiation and relying on post-crisis mechanisms rather than preventative oversight, the U.S. is effectively betting on market discipline alone.
MiCAR, while more cautious, builds resilience into the architecture of digital finance. It places stability before scale and sovereignty before speed. Innovation is welcomed—but only within the guardrails of law, transparency, and public interest.
The contest between the Genius Act and MiCAR is not simply about crypto regulation—it is about competing visions of global economic order. One seeks to dominate by diffusion; the other, to defend by design. One prioritizes expansion and influence; the other, integrity and control.
Final Thought
In the digital age, the question is no longer just what money is, but who controls it. The Genius Act may be bold, but boldness without restraint can turn genius into hubris. As global digital finance evolves, sovereignty—not scale—may be the smarter play.
On a similar topic, you can read the article “Italy Extends Crypto VASP Regime: What the MiCAR Extension Really Means for the Market“.
Authors: Andrea Pantaleo and Giulio Napolitano