Divergent Stablecoin Regulations May Shape Future Market Dynamics and Cross-Border Viability

Key Points

1. MiCA allows non-bank issuers under the supervision of the European Banking Authority, while GENIUS mandates bank involvement and Hong Kong requires HKMA licensing with strict requirements.

2. Diverging regulations lead to varying reserve requirements, custody arrangements, and compliance costs, which may push smaller firms out of the market and concentrate power among larger issuers.

3. Regulatory fragmentation could limit innovation and create operational complexity for stablecoin issuers, favoring well-capitalized firms.

4. Competitive fragmentation is expected to persist in the near term, but economic pressures and risk mitigation may drive future regulatory alignment.

5. GENIUS is likely to influence global regulatory standards due to its market weight, while Hong Kong’s conservative approach could also set norms despite its strict requirements.