Core Insights - MiCA regulation aims to end the "Wild West" era of stablecoins but may inadvertently legitimize systemic risks associated with them [1] - The distinction between crypto markets and traditional finance is blurring as stablecoins gain regulatory approval, transforming into mainstream payment instruments [2] - Trust in stablecoins as money could lead to competition with bank deposits, affecting the traditional credit-creating mechanisms [3] Group 1: Regulatory Framework - MiCA addresses micro-prudential issues by ensuring issuers do not collapse but overlooks macro-prudential risks related to large-scale shifts from bank deposits to stablecoins [4] - The Bank of England suggests that widely-used stablecoins should be regulated like banks, proposing caps on holdings to mitigate risks [4] Group 2: Economic Implications - A significant transition from commercial bank deposits to stablecoins could threaten banks' balance sheets, reduce credit availability, and complicate monetary policy transmission [5] - Even regulated stablecoins may pose destabilizing risks as they scale, with MiCA's safeguards not fully addressing these structural concerns [5] Group 3: Offshore Risks - The UK's regulatory approach is cautious towards domestic issuers but lenient on offshore stablecoins, leaving consumers vulnerable to risks from overseas entities [6]