Paxos Expands USDG Stablecoin to EU Under MiCA Rules

Paxos, the blockchain infrastructure firm behind the Global Dollar stablecoin (USDG), has officially introduced the digital currency to the European Union under the region’s Markets in Crypto-Assets (MiCA) regulatory framework. This move marks a significant step for the issuer as it seeks to align its global digital asset operations with region-specific oversight and consumer protection requirements.

USDG’s entry into the EU has been facilitated through partnerships with major platforms such as Kraken and Gate, which are among the first to distribute the stablecoin within the region. Notably, Paxos has adopted a distinctive revenue-sharing model for USDG, redistributing a substantial portion of the earnings generated from stablecoin reserves to its distribution partners. This approach deviates from common industry practices, where issuers typically retain the majority of such revenues.

Executives at Paxos emphasized that the launch reflects a commitment to regulatory transparency and high standards of protection for users. They suggested that the availability of USDG across the EU underscores the firm’s broader mission to offer globally regulated digital assets while working in partnership with financial authorities. The goal, they stated, is to ensure that compliance and innovation progress in tandem.

USDG, which was originally issued under the laws of Singapore—where Paxos is regulated—has since expanded its global footprint. To comply with EU regulations, Paxos acquired Membrane Finance, a licensed Finnish entity, in 2023. The acquisition, now operating as Paxos Issuance Europe, enabled the company to secure a MiCA license and facilitated the formal EU launch of USDG.

Globally, USDG is distributed through several prominent partners, including Anchorage Digital, Fiserv, Mastercard, Robinhood, and Worldpay. Despite the extensive partner network, the stablecoin is still in the early stages of its lifecycle, with total issuance currently around $320 million.

The launch has drawn attention to the complexities of managing stablecoins across multiple jurisdictions. The European Union mandates that smaller stablecoins such as USDG must maintain at least 30% of reserves as cash in local banks. This creates operational challenges in ensuring stablecoin fungibility across regions, particularly when there is only one smart contract per blockchain representing all global issuances of the token.

To address these issues, Paxos plans to manage reserve rebalancing between regions based on estimated issuance data. While crypto exchanges in the EU are required to report stablecoin activity daily to Electronic Money Token (EMT) issuers like Paxos, balances held in self-hosted wallets remain opaque. To accommodate regulatory expectations, the company’s white paper outlines a reserve rebalancing policy that will occur at least weekly, though this frequency could increase as issuance scales.

This operational structure, however, has sparked concern among EU policymakers. Lawmakers have expressed apprehension that in times of financial stress, non-EU users may exploit the EU framework to redeem USDG more affordably and directly from the issuer. They view such practices as potentially undermining MiCA’s intent, particularly since the regulatory text deliberately avoids recognition of stablecoin issuance from third countries. According to officials, Paxos’ reserve management method may resemble a workaround that indirectly facilitates such unrecognized issuance.

With this EU rollout, Paxos has introduced not only a stablecoin aligned with stringent regional rules but also a revenue-sharing model that could influence how stablecoins are issued and distributed in the future. As regulatory frameworks evolve and cross-border digital asset management grows more complex, the company’s approach is likely to remain under close scrutiny from both industry participants and lawmakers.