Circle executive says EU risk is ‘regulator’s own goal’ amid clash between MiCA and PSD2

Stablecoin companies in the European Union face significant regulatory challenges. From March 2026, providers of electronic money token (EMT) storage and transfer services may be required to hold both a MiCA encryption license and a separate payment services license for the same activity.

The situation poses a significant compliance burden, with industry leaders warning that it could slow adoption of euro stablecoins.

Duplicate regulations create a compliance crisis

The root of the problem is the overlap between the MiCA (Markets in Cryptoassets) Regulation and the Payment Services Directive (PSD2).

In June 2025, the European Banking Authority issued a no-action letter clarifying the interaction between MiCA and PSD2 for crypto asset service providers managing EMT.

This guidance confirms that the storage and transfer of stablecoins on behalf of clients is a payment service under PSD2. As a result, companies that are already licensed to deal with paramedics under MiCA will also need to secure a payment institution license or work with a licensed payment service provider.

The EBA has a transition period until March 2, 2026. During this period, national authorities should refrain from enforcing dual licensing requirements. This arrangement ends in five months.

Cryptocurrency companies will then face two regulatory frameworks for one business activity, effectively doubling capital requirements and compliance costs.

This dual licensing approach conflicts with MiCA’s core goal of achieving uniform regulation. In its official opinion, the EBA acknowledged that all financial activities should fall under one law.

However, both MiCA and PSD2 currently control stablecoin storage and transfer services, creating excessive oversight and increasing costs without improving consumer protection.

Capital requirements highlight the burden. Companies that hold both licenses must:

• MiCA’s minimum capital for crypto asset service providers is 125,000 euros
• Another 125,000 euros for PSD2 payment services

The total value of these amounts to 250,000 euros, or almost $290,000. Additional compliance, reporting, and oversight costs for both regimes further increase operational challenges.

Industry warns of declining competitiveness

Patrick Hansen, Circle’s head of EU policy, highlighted the risks posed by this regulatory conflict. In a post on Twitter, Hansen said failure to resolve the MiCA-PSD2 conflict by the March 2026 deadline would be a major setback for the EU.

“Under current EBA guidance, companies using electronic money tokens (EMTs) may soon face dual licensing requirements for the same custody or transfer activity: a MiCA CASP license and a PSD2 (soon PSD3) payments license, starting in March 2026. This means regulatory duplication for companies dealing with stablecoin services,” Hansen explained.

Hansen argues that the dual licensing trap violates the EU’s principles of proportionality, legal clarity and consistency.

This situation also contradicts the EU’s efforts to reduce regulatory complexity and improve competitiveness. Initiatives such as the European Commission’s Simplification Plan and Mario Draghi’s Competitiveness Report seek to reduce regulatory hurdles, not increase them.

Beyond compliance costs, duplication has broader implications. Crypto asset service providers distribute the majority of MiCA-regulated stablecoins.

If dual licensing makes these services unsustainable, providers could leave the EU or wind down their operations. This scenario would slow the growth of euro-pegged stablecoins and undermine the EU’s ambitions in digital finance and the euro’s global role.

Research from the Journal of International Economic Law demonstrates that the EU has the most stringent stablecoin regulations of any major market. A comparative study conducted in May 2025 found that MiCA sets higher health and safety standards than regulations in the US and UK.

Adding PSD2 licenses to MiCA could move service providers to more flexible jurisdictions and widen the regulatory gap.

Proposed solutions and legal measures

EBA’s No Action Letter outlines two key legal amendments.

• Amend MiCA to include the relevant payment services provisions of PSD2.

This creates a single framework for EMT activities, maintains consumer protection, and eliminates the need for separate paid licenses.

• Amends the upcoming Payment Services Directive 3 and the Payment Services Regulations.

This will exempt MiCA-licensed companies from separate payment service rules for storage and transportation of paramedics.

The European Parliament’s press conference on PSD3 indicated that the legislative process is underway and is expected to be adopted after 2025.

This gives lawmakers a limited window in which to add certain exemptions before a March 2026 deadline. Industry voices are calling for swift action on two fronts.

• Extend the transition period from March 2026 to at least 2027 to avoid a regulatory cliff while lawmakers adapt the rules.
• Ensure that PSD3 isolates or cross-references MiCA license activity and removes dual licenses for services that are already covered.

• Some proposals also propose to exempt first-party EMT transfers to and from self-custodial wallets from the payment services rules.

The EBA’s guidance on license rationalization provides interim relief. National authorities will now be able to reuse MiCA application documents when companies seek payment licenses, reducing administrative duplication.

Supervisors will also be encouraged to ease enforcement of certain PSD2 provisions, such as safeguards for paramedic services and open banking rules, during the transition.

Nevertheless, important obligations remain. Strong customer authentication and payment fraud reporting requirements remain in effect even during the inaction period.

These measures will help protect consumers as broader reforms move forward. Policymakers now need to balance necessary safeguards with the need to eliminate regulatory duplication that can inhibit innovation and growth.

The next few months will be crucial. If the EU does not resolve this regulatory issue by March 2026, it could fragment the market and make stablecoin services too expensive for many providers.

Companies may exit and users may turn to unregulated or offshore alternatives. Legal integrity is essential to maintaining a stable and competitive market for EU stablecoins.

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