Author: Stella Yeom (Tiger Research)
Compiled by: Shenchao TechFlow
Shenchao Introduction: In the evolving coordinates of global crypto regulation, stablecoins are accelerating from the gray fringe toward the core heartland of the modern banking system. For a long time, traditional financial institutions in most countries and regions have taken a wait-and-see attitude toward involvement in crypto assets, habitually using "regulatory rules have not yet been finalized" as a safe harbor to delay their positioning. However, the implementation of Europe's Markets in Crypto-Assets Regulation (MiCA) has completely rewritten this passive game logic.
European banks did not wait for an idealized regulatory utopia. Instead, relying on the clear compliance boundaries MiCA sets for electronic money tokens (EMTs) and asset-referenced tokens (ARTs), they were the first to open up a multi-track paradigm of commercial banks building their own systems, establishing electronic money institution (EMI) subsidiaries to issue tokens, and providing infrastructure custody and distribution.
In this in-depth research report, Asia's renowned think tank Tiger Research provides a detailed analysis of the three core preliminary decisions under the MiCA framework: the selection of the governance structure for the issuing entity, the allocation of 30% segregated deposits and highly liquid reserve assets, and the whitepaper review and crisis liquidation and redemption mechanisms for which management bears statutory responsibility.
This report not only provides banks in various countries currently in a period of regulatory ambiguity with a practical and feasible roadmap for advance preparation, but also profoundly reveals a cold market rule: when the legislation finally takes effect, the starting line will no longer be the same. Only institutions that complete compliance testing and network construction first can win the final game in the trillion-dollar on-chain settlement track.
Key Points
While those financial institutions waiting for final regulatory decisions are still weighing whether to enter the market, banks that completed their business architecture early have already locked in enterprise payment networks, opening up a gap that latecomers will find hard to close. European banks that acted swiftly as soon as the rules were established now firmly hold a first-mover dominant position in the market.
Waiting until legislation is formally passed to begin business review is too late. Only those banks that have already finalized their business models (whether issuing directly by the parent bank, issuing through a subsidiary, or providing related services as an infrastructure service provider) and have completed rigorous calculations of the 30% segregated deposit requirement and the regulatory compliance costs at each stage can smoothly launch services on the very first day the law formally takes effect.
Without a whitepaper review mechanism under which management bears joint legal liability, and without a complete redemption and crisis recovery plan prepared in advance, even if the license application channel officially opens, the product launch date will be postponed indefinitely.
On the day regulation formally takes effect, banks will by no means stand on the same starting line. While banks passively waiting for final legislation are still scrambling to prepare basic application materials, banks that have completed profitability analysis using MiCA as a benchmark and finalized external partnerships are already able to immediately undertake and capture real transaction flows.
The door opened by regulation to all banks is equal, but market share will only flow to those pioneers who complete preparations first.
Why Look to Europe
While other regions around the world are still repeatedly weighing how to control stablecoin risks, Europe has already taken the lead through the Markets in Crypto-Assets Regulation (MiCA) in clarifying market entry thresholds, reserve management rules, and statutory redemption obligations.
Once the regulatory system was clearly implemented, European banks did not hesitate to enter this market in a big way. Their practical experience has also become the most powerful real-world reference model for regulators in other countries and regions that have not yet issued clear regulatory guidance.
Given that waiting until regulation is fully finalized before taking action will inevitably miss the opportunity, commercial banks in countries and regions where stablecoin rules are not yet clear must design their business models in advance before the relevant rules are formally introduced.
Conducting stablecoin business is by no means as simple as minting tokens and obtaining a license. Before the law is finalized, banks need to make full preparations around three core decisions.
The first is the business model decision: banks must decide whether to issue tokens directly themselves or to provide derivative infrastructure services such as distribution and custody for other issuers.
The second is the reserve management framework: banks must determine how to segregate and invest reserve assets so as to fully satisfy the statutory regulatory requirements applicable to that issuing entity.
The third is the redemption mechanism and customer protection: banks must formulate detailed operational plans to ensure that they can promptly repay principal to customers when redemption requests surge, and establish a standardized information disclosure architecture.
The common benchmark reference for these three core decisions is precisely the regulatory details MiCA sets for electronic money tokens (EMTs, the category of stablecoins pegged to fiat currency).
This report provides an in-depth analysis of how Europe regulates the issuance of EMTs and related services, and outlines practical preparations that commercial banks facing a regulatory vacuum can begin right now. For each decision, we will proceed according to a unified logic: the core decision that currently needs to be made, the relevant specific provisions of MiCA, and the preliminary actions banks can advance in advance.
Because MiCA only defines legal boundaries and does not make business model or monetization strategy choices on behalf of banks, Europe's early precedents are used here as sandbox simulations to systematically clarify the key choices that banks outside the EU must overcome one by one before their local regulations are introduced.
First Decision: Direct Issuance or Merely Providing Necessary Services
Figure: Comparison of the dual-track architecture of direct issuance by banks versus issuance by an established electronic money institution (EMI) subsidiary
The top-level architecture design of the issuance business has far higher priority than the underlying technology selection.
Within the EU, only commercial banks and electronic money institutions (EMIs) are permitted to issue EMTs. An electronic money institution refers to a company that allows customers to make payments or transfers using funds loaded into an electronic wallet or similar account. In addition to issuing directly through the parent bank, a bank can also establish an independent subsidiary, apply for an EMI license for it, and issue EMTs through that entity.
Both types of licenses allow stablecoin issuance, but the accompanying legal compliance and capital adequacy requirements differ fundamentally.
Therefore, banks must first establish a corporate governance framework and choose between direct issuance by the parent bank and issuance by a subsidiary based on their own strategic intentions: whether they hope to completely isolate the parent bank from potential prudential regulatory risks, or hope to directly leverage the parent bank's deep and solid traditional banking reputation and infrastructure advantages to open up the market.
Before formal issuance, a stablecoin must also publicly release a crypto-asset whitepaper, a strict disclosure document equivalent to a prospectus for traditional financial products. Unless this whitepaper, covering the token's legal structure, issuance and redemption terms, and related risks, is completed and approved by the competent authority, the stablecoin is absolutely not permitted to be publicly offered to the public or listed on any trading platform.
Figure: Core process of the redemption mechanism and commercial revenue model that must be implemented before the crypto-asset white paper is published
Before starting to draft the white paper, banks must design in advance the redemption process for returning customer funds and a commercial profitability model sufficient to support all operational expenses.
According to Article 49 of MiCA, issuers must at all times redeem in full at par value whenever token holders request it. Apart from the necessary costs actually incurred, redemption may not carry any additional charges, and these costs must be disclosed in detail in the white paper in advance.
Therefore, before writing the white paper, issuers must conduct a strict internal review of redemption fees and clearing and settlement channels, and design a sustainable profitability model that does not rely on exit fees at all.
Figure: Stablecoin custody, distribution, and circulation service models that commercial banks can enter without issuing their own coins
Even if commercial banks do not issue stablecoins themselves, they can still earn substantial revenue by providing derivative services.
MiCA does not require banks to issue their own stablecoins in order to participate in the stablecoin business. Banks can fully act as crypto-asset transfer service providers, sending and receiving tokens on behalf of clients; or as custody service providers, securely safeguarding token private keys.
Through these services, banks can both handle large volumes of client transactions and earn stable fee income, while completely avoiding the heavy capital and reserve regulatory burdens that fall directly on issuers.
However, the scope of business permitted to different types of institutions is entirely different. Relying on their existing banking licenses, commercial banks need only make compliance filings with regulators to directly carry out transfer and custody business.
By contrast, electronic money institutions (EMIs) may only provide custody services for EMTs they themselves issue, and may provide transfer services only when the transfer business meets the payment service standards defined in the relevant directive.
In addition, business overlap with the traditional payment regulatory framework must be carefully examined. Transferring tokens on behalf of clients is not only governed by MiCA but also falls within the scope of traditional payment service regulation.
Therefore, banks must verify in advance whether their target services meet the legal definition of payment execution in the European Payment Services Directive 2 (PSD2), and whether additional compliance filing procedures are required.
Figure: Overlap and compliance interface between stablecoin token transfer services and the traditional payment regulatory framework (PSD2)
The fee structure and break-even point of token transfer services must be carefully calculated in advance.
Under MiCA, crypto-asset transfer service providers must clearly state in the client service agreement the fee charged for each transfer and the specific execution time limit. If fees are set too high, clients will bypass the bank and use native ordinary on-chain transfers instead; if fees are set too low, the bank cannot cover the Gas fees of the underlying blockchain network and the system hardware and software operation and maintenance costs.
Therefore, banks must conduct stress tests at the early stage of project planning to verify whether their fee schemes for enterprise-level payments and cross-border remittances can fully cover network transaction friction costs and daily operating expenses.
Given that redeeming stablecoins into fiat currency is in principle legally prohibited from charging any additional fees, banks must also draw a clear operational boundary between transfer services that may lawfully charge fees and redemption services where fees are absolutely prohibited, in order to prevent building a business model on a fee logic that regulators may later determine to be illegal.
Reserve Management Decision: Matching the Regulatory Status of the Issuing Entity
Figure: Reserve management rules and applicable legal frameworks corresponding to the regulatory identities of different issuing entities
Before deciding how to manage client funds, banks must first confirm the specific regulatory rules applicable to the issuing entity.
Article 48 of MiCA explicitly treats EMTs as electronic money, and the European Electronic Money Directive (EMD) applies directly to any aspect not specifically provided for in MiCA.
However, reserve management rules differ greatly depending on the legal organizational form of the issuer. A commercial bank issuing directly may manage client funds in a coordinated manner under its existing banking regulatory framework; but if a stablecoin is issued by an EMI subsidiary, client funds must be completely segregated from its own assets from the very first day the funds are received, and may only be invested in low-risk assets with extremely high safety and high liquidity.
Figure: The 30% segregated deposit and high-liquidity safe asset allocation ratio requirements when an electronic money institution (EMI) issues stablecoins
Banks must reasonably plan where client funds are deposited and their allocation ratios, and conduct detailed calculations of business feasibility in light of the macroeconomic interest rate environment.
Under the rigid requirements of Article 54 of MiCA, electronic money institutions issuing EMTs must hold at least 30% of the funds raised in segregated, ring-fenced accounts at qualified credit institutions (commercial banks). The remaining funds may only be invested in safe, low-risk assets, such as government bonds denominated in the same currency to which the EMT is pegged.
In a low-interest-rate environment, interest income from bank deposits and government bonds may struggle to cover the high day-to-day costs of compliance operations; and when market interest rates rise, managing the duration and liquidity risk of the investment portfolio becomes significantly more difficult.
Therefore, before finalizing a reserve investment portfolio plan, banks must conduct comprehensive profit simulation exercises for different interest rate trajectories.
Banks issuing through an EMI subsidiary must formulate a detailed asset allocation strategy in advance, fully taking into account the credit concentration risk of deposit counterparties.
Figure: The core quantitative assessment indicators used by the European Banking Authority (EBA) to determine a "Significant EMT"
Not all stablecoins will face the most stringent regulatory shackles as soon as they launch, but compliance costs must be estimated in stages on a graduated basis.
According to Article 56 of MiCA, if a stablecoin reaches specific quantitative thresholds in dimensions such as market capitalization, number of token holders, or average daily transaction count, the European Banking Authority (EBA) will formally classify it as a "Significant EMT."
Once this classification label is applied, the stablecoin will face stricter own-capital adequacy requirements, more intensive reserve regulatory scrutiny, and will be directly transferred to the EBA for full direct supervision.
Among the 45 EMTs currently notified to EU regulators, USDC is by far the only asset that meets the above criteria for determining a significant stablecoin.
However, once classified as a significant stablecoin, the regulatory burden will surge precipitously. The minimum proportion of reserves that must be held in segregated deposit accounts at commercial banks will jump directly from 30% to 60%, which greatly ties up highly liquid cash positions and severely compresses the investment options available for the remaining reserves.
At the same time, the own-capital threshold that issuers must hold will also rise steeply from an average of 2% of reserve assets for ordinary EMTs to at least 3%.
Therefore, banks' financial profit-and-loss models must adopt a staged, graduated design, strictly separating the minimum compliance costs in the early stage of the product from the heavy capital obligations that follow as scale expands.
Figure: The staged escalation ladder of capital adequacy and compliance costs for significant stablecoin issuers as business scale expands
When selecting an issuance entity, banks must incorporate upfront the potential subsequent costs of significant asset classification, capital top-ups, and comprehensive risk management.
According to Article 58 of MiCA, electronic money institutions issuing significant EMTs must hold own capital equal to at least 3% of average reserve assets and accept additional liquidity buffer and risk management constraints.
If a commercial bank chooses to issue indirectly through an EMI subsidiary, as the issuance scale expands rapidly, the subsidiary itself must independently meet this capital threshold, which will force the parent bank to continuously inject large additional capital into it.
By contrast, if a commercial bank issues directly, it is exempt from the above additional capital obligations under Article 58(1). Banks can directly reuse their existing prudential capital adequacy framework and risk control systems, which makes direct issuance by the parent bank an attractive strategic path worth priority evaluation from the outset.
Redemption Mechanisms and Customer Communication Decisions: Integrated Design of Compliance Processes
Figure: The anytime at-par redemption process and customer guidance standards for electronic money token holders under the MiCA framework
Banks must design the redemption operational process and front-end customer guidance in an integrated manner, ensuring that customers submitting redemption requests clearly understand the expectations of the entire process and smoothly recover their fiat funds with zero delay.
Under the hard constraints of Article 49 of MiCA, EMT holders have the right to require the issuer to redeem at full par value at any time. The issuer must execute the redemption immediately and without delay, must not attach any additional restrictive conditions, and must not charge any fees beyond the actual costs previously disclosed.
At the operational level, commercial banks must clearly define standards and responsible personnel for every specific step from receipt of a redemption request to completion of the final fiat currency transfer.
At the same time, banks must clearly explain the specific mechanics of redemption in the customer-facing front-end service interface, to prevent customers from misunderstanding and mistakenly treating stablecoins as traditional bank deposits fully protected by deposit insurance.
Figure: End-to-end redemption operational process node breakdown and responsibility allocation system by role
The white paper and front-end business interface must accurately and thoroughly clarify the true legal nature of the product and the scope of asset protection, eliminating any room for public misunderstanding.
Article 51 of MiCA expressly provides that the white paper must disclose in detail the issuer information, the token's underlying architecture, holders' redemption rights, and the core risks faced, and emphasizes that all marketing and promotional content must be absolutely consistent with the white paper.
In addition, all promotional materials must clearly warn in the most prominent wording: this token is by no means a bank deposit and is not covered by any national statutory deposit protection scheme.
Product naming and external marketing copy must likewise undergo rigorous compliance review, and it is strictly prohibited to induce or convey any false implication of deposit insurance protection. If a bank's promotional materials are judged by regulators to contain misleading statements, the bank will not only face heavy administrative penalties but will also directly bear huge civil damages claims from token holders.
Figure: Key points of compliance review for crypto-asset white papers and the compliance defense red lines for product marketing and promotion
Banks must clearly determine who will review and approve the truthfulness and accuracy of the white paper content, and fully archive and retain evidence records of the entire approval chain.
According to Article 52 of MiCA, if token holders suffer property losses due to false records, misleading statements, or major omissions in the white paper, management will directly bear statutory joint and several liability for compensation. This liability is pursued directly against individual members of the administrative, management, or supervisory bodies, rather than merely imposing corporate legal liability on the company involved.
Once major losses occur, investors have the right to directly file civil tort compensation lawsuits against individual members of management and the supervisory board. More critically, this statutory individual joint and several liability may under no circumstances be excluded or limited in advance through any commercial contract or service disclaimer clause.
For this reason, commercial banks must establish in advance a multi-department collaborative internal control approval governance mechanism, precisely decomposing the compliance endorsement responsibility for each chapter of the white paper to each functional department: the operations department signs to confirm the completeness of the redemption process, the treasury and finance department signs to endorse the liquidity and reserve asset allocation strategy, and the legal and compliance department checks the redemption performance entity and legal compliance risks.
The review basis and approval working papers of each business line must be systematically archived for inspection, and a regular dynamic monitoring mechanism must be established. Once any substantive adjustment occurs in the underlying operating system or service agreement terms, the disclosure wording of the white paper must be updated accordingly.
Figure: Comparison of the architecture of the Recovery Plan for responding to crisis liquidity shocks and the business termination redemption and liquidation plan
Banks must simultaneously formulate a Recovery Plan for resolving acute bank-run crises and a Redemption Plan for orderly business termination, liquidation, and exit.
Article 55 of MiCA mandates that every EMT issuer must routinely formulate and maintain a crisis recovery plan and a redemption and liquidation plan.
The recovery plan sets out in detail how the issuer will quickly raise emergency liquidity and restore normal daily operations when encountering sudden liquidity crises such as large-scale concentrated redemption runs.
By contrast, the redemption plan covers an orderly liquidation plan upon business termination: when the regulator determines that the issuer can no longer maintain normal operations, or when the project has to be proactively shut down, all reserve assets must be promptly realized and disposed of, and the remaining funds must be returned in full to all token-holding customers in accordance with the principle of fairness.
This means that what banks need is by no means merely a crisis recovery manual covering emergency financing channels and emergency decision-making processes.
They must also design in advance a complete liquidation and shutdown plan for the worst-case scenario: an emergency response mechanism capable of calculating each customer's asset share in real time and accurately, quickly disposing of and realizing assets and fairly distributing the liquidation assets, and completing comprehensive information disclosure to affected customers in accordance with the law.
Preparatory work banks can undertake without waiting for regulators
The preceding text, using Europe's MiCA as the benchmark framework, systematically reviewed the compliance capabilities commercial banks need in stablecoin issuance, reserve asset management, and full-process redemption handling. MiCA provides a clear reference coordinate for countries and regions that are still deliberating their own regulatory details, but in actual implementation, specific commercial operations must inevitably comply with the local regulations ultimately promulgated in the relevant jurisdiction.
However, this by no means implies that banks can passively wait for local legislation to be finalized before taking action: before the law formally takes effect, there are many key areas with extremely clear boundaries in which banks can immediately begin feasibility assessments and advance arrangements.
The first task is to conduct an objective and pragmatic quantitative cost-benefit comparison against the traditional financial system.
Banks must use detailed data to verify the specific benefits that introducing stablecoins can bring to customers and to the banks themselves. Specifically, they need to precisely measure the quantitative performance of stablecoins in saving fee expenses and shortening the time for funds to arrive compared with traditional SWIFT-based cross-border wire transfer networks, and thoroughly calculate whether, after deducting the underlying software and hardware system construction and long-term operational compliance costs, a genuine net profit margin can be retained for the bank.
This work will outline the initial skeleton for the entire business and help banks clarify the first batch of target customer groups to focus on, such as B2B large-value cross-border trade settlement or small-value high-frequency cross-border remittance scenarios.
The second task is to conduct in-depth research on the feasibility of the business model: independent self-built issuance, joint consortium issuance, or pure distribution and circulation.
The choice of business model must be strictly anchored to expected return on investment and profitability. Commercial banks may issue independently through the parent bank, act as an infrastructure distributor to resell and circulate mature compliant tokens already on the market, or join with other commercial banks to form a joint venture issuance consortium.
In Europe, several well-known financial institutions are jointly advancing the issuance of a euro stablecoin precisely through the Qivalis consortium alliance. This alliance model effectively dilutes the heavy R&D and maintenance costs of the underlying infrastructure and statutory redemption architecture, while giving each bank sufficient freedom to focus on cultivating distinctive financial services at its own front-end customer touchpoints.
The third task is to verify genuine commercial pain-point demand as early as possible and to secure cross-border payment cooperation networks in advance.
Commercial banks have absolutely no need to wait for the bill to be finalized; they can now proactively reach out to core customer groups with high-frequency cross-border fund transfer needs, such as import and export foreign trade enterprises, cross-border e-commerce companies, and fintech companies, to accurately identify their settlement pain points.
Banks can use practical models to visually demonstrate to them the time and capital costs that stablecoins can save, and early on engage in substantive strategic cooperation discussions with local clearing banks and regulated payment institutions in overseas target markets.
When regulation is finally formally finalized, banks will by no means be standing at the same starting line.
Those banks that have made thorough preparations based on the mature and complete MiCA framework and have already fully verified customers' genuine needs and a closed commercial profitability loop can directly switch to the full execution stage with one click; whereas those banks that passively wait for the final detailed rules to be implemented will only then begin hastily initiating projects and demonstrating business models.
A finalized regulatory framework may nominally open its doors equally to all banks, but it can never return time, nor the first-mover market share that early movers have already firmly staked out, to latecomers.
Rather than wearing away opportunities in prolonged waiting, the wisest strategic decision for commercial banks right now is to use mature mainstream international frameworks such as Europe's MiCA as a mirror, immediately verify customers' genuine demands, stress-test business models, and make every effort to build the ecosystem infrastructure network necessary for winning in future on-chain finance.
