EU Stablecoins Face Dual Licensing Trap in MiCA – PSD2 Overlap

Stablecoin firms in the European Union are approaching a major regulatory challenge. Beginning in March 2026, providers of e-money token (EMT) custody and transfer services may be required to hold both a MiCA crypto license and a separate payment services license for the same activity.

This situation creates a significant compliance burden, with industry leaders warning it could stall euro stablecoin adoption.

Regulatory Overlap Triggers Compliance Crisis

The root of the issue is the overlap between the MiCA (Markets in Crypto-Assets) regulation and the Payment Services Directive (PSD2).

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In June 2025, the European Banking Authority issued a No Action Letter to clarify the interaction between MiCA and PSD2 for crypto asset service providers managing EMTs.

The guidance confirmed that custody and transferring stablecoins on behalf of clients is a payment service under PSD2. As a result, firms already licensed under MiCA to handle EMTs must also secure a payment institution license or work with a licensed payment service provider.

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

After that, crypto firms will face two regulatory frameworks for a single business activity, effectively doubling capital requirements and compliance costs.

This dual licensing approach contradicts the core goal of MiCA, which is to achieve unified regulation. The EBA acknowledged in its official opinion that any financial activity should fall under one law.

Yet, both MiCA and PSD2 now govern stablecoin custody and transfer services, resulting in redundant oversight that increases costs without improving consumer protection.

Capital requirements highlight the burden. A business holding both licenses must meet:

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

These totals €250,000 or almost $290,000. Additional compliance, reporting, and supervisory fees for both regimes further increase operational challenges.

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Industry Warns of Competitiveness Damage

Patrick Hansen, Circle’s EU policy lead, has underlined the risk this regulatory conflict poses. In a post on X (Twitter), Hansen stated that failing to resolve the MiCA–PSD2 clash before the March 2026 deadline would be a major setback for the EU.

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

The situation also conflicts with EU efforts to reduce regulatory complexity and improve competitiveness. Initiatives such as the European Commission’s simplification agenda and Mario Draghi’s competitiveness report call for fewer regulatory obstacles, not more.

Beyond compliance costs, the overlap has wider effects. Crypto asset service providers distribute the majority of MiCA-regulated stablecoins.

If dual licensing makes these services unsustainable, providers may exit the EU or scale back their operations. This scenario would slow the growth of euro-pegged stablecoin, undercutting the EU’s ambitions in digital finance and the global role of the euro.

A Journal of International Economic Law study demonstrates that the EU has implemented the strictest stablecoin regulations among major markets. A comparative study conducted in May 2025 found that MiCA sets higher prudential and safeguarding standards than regulations in the US and UK.

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Adding PSD2 licensing on top of MiCA could drive service providers to more accommodating jurisdictions, widening the regulatory gap.

Proposed Solutions and Legislative Pathway

The EBA’s No Action Letter outlines two main legislative fixes.

• Amend MiCA to include relevant payment service provisions from PSD2.

This would create a single framework for EMT activities, preserving consumer protections and eliminating the need for separate payment licenses.

• Modify the upcoming Payment Services Directive 3 and Payment Services Regulation.

This would exempt MiCA-licensed firms from separate payment service rules for EMT custody and transfers.

The European Parliament briefing on PSD3 indicates that the legislative process is ongoing, with adoption expected to occur after 2025.

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This gives lawmakers a limited window to add specific exemptions before the March 2026 deadline. Industry voices urge rapid action on two fronts.

• Extend the transition period beyond March 2026 to at least 2027 to prevent a regulatory cliff while lawmakers adapt the rules.
• Ensure PSD3 carves out or cross-references MiCA-licensed activities, removing dual licensing for services already covered.

• Some proposals also suggest exempting first-party EMT transfers to and from self-custody wallets from payment service rules.

The EBA’s guidance on streamlined licensing offers interim relief. National authorities can let firms reuse documentation from their MiCA application when seeking payment licenses, reducing administrative duplication.

Supervisors are also encouraged to ease the enforcement of certain PSD2 provisions, such as safeguarding and open banking rules, for EMT services during the transition.

Nonetheless, critical obligations remain. Strong customer authentication and payment fraud reporting requirements remain in effect, even during the no-action period.

These measures help protect consumers as broader reforms move forward. Policymakers must now strike a balance between necessary safeguards and the need to eliminate regulatory overlap that could stifle innovation and growth.

The months ahead are crucial. If the EU does not resolve this regulatory issue before March 2026, the market could fragment, making stablecoin services too costly for many providers.

Firms may leave, and users could turn to unregulated or offshore alternatives. Legislative alignment is crucial for maintaining a stable and competitive market for EU stablecoins.