Bitgo CEO: MiCA could expose EU stablecoins to bank-run risk

Mike Belshe, chief executive of Bitgo, warned on social media that the EU’s Markets in Crypto Assets (MiCA) framework could expose stablecoin issuers by requiring them to hold reserves in traditional fractional-reserve banks. He said that arrangement ties large stablecoin reserves to the same €100,000 deposit-insurance limit that applies to retail customers.

Belshe wrote that if an issuer places billions of euros in a single bank that fails, the insurance cap would cover only a small portion of those funds, leaving most of the backing uninsured. He pointed to the 2023 collapse of Silicon Valley Bank, when Circle held $3.3 billion of USDC reserves at the bank, an episode that led to a temporary depeg and market disruption. U.S. authorities later backstopped deposits and Circle moved funds to BNY Mellon.

MiCA sets rules for token issuance and reserve management across the EU and aims to increase transparency and consumer protection. Belshe’s criticism centers on how the regulation’s custody requirements interact with existing banking practices and the design of deposit insurance.

He argued that regulators need to plan for what happens when an institution holding reserves fails, not only for where reserves are kept. In his posts he wrote, “That creates a direct link between cryptomarkets and traditional banking stress. When a bank wobbles, stablecoin reserves wobble with it.” He added, “EU deposit insurance caps at €100K per depositor. A stablecoin issuer holding billions in reserves gets the same protection as a retail savings account. That’s not a rounding error — it’s a structural gap.”

Bitgo, a major custody provider with ties to stablecoin operations, framed the comments around protecting client assets and reducing single points of failure between crypto settlements and the traditional banking system.

Market participants and policymakers face a choice between requiring bank custody for fiat reserves, which provides legal and accounting clarity, and limiting exposure to bank liquidity and solvency risks as MiCA is implemented across member states.