With MiCA now live, what changes should crypto users and investors expect when using platforms or buying tokens in the EU?

MiCA fully comes into force

On December 30, 2024, the European Union launched the Markets in Crypto-Assets framework, establishing a unified rulebook for the EU crypto industry.

The journey commenced on April 20, 2023, when the EU Parliament adopted MiCA to address issues such as fraud, market collapses, and the lack of investor protection that have long plagued the rapidly evolving crypto sector.

Prior to MiCA, crypto businesses contended with a patchwork of national regulations. While some countries fostered innovation, others imposed significant obstacles. MiCA transforms this landscape by introducing a single, harmonized framework applicable to all 27 EU member states.

Meanwhile, across the Atlantic, the U.S. is poised for its own crypto transformation. President-elect Donald Trump, set to begin his second term on January 20, has expressed his intent to make America the “crypto capital” of the world.

In a series of notable appointments, Trump has appointed Silicon Valley veteran David Sacks as the White House’s AI and crypto “czar,” alongside Bo Hines, the newly designated executive director of the Presidential Council of Advisers for Digital Assets. Together, they aim to steer the U.S. toward crypto supremacy.

As crypto momentum accelerates, what implications does this hold for the industry, companies, and millions of investors? To unpack this, let’s explore the essence of MiCA, the rationale for its introduction, and how it is revolutionizing the landscape.

What exactly is MiCA, and why was it introduced?

MiCA aims to regulate the crypto sector akin to any major financial industry while promoting innovation. The framework emphasizes three critical areas—issuance of crypto-assets, services provided by crypto platforms, and stablecoins—introducing essential structure to a previously disordered environment. Here’s how it functions:

  • Issuance and offering of crypto-assets
  • Regulation of crypto service providers
  • Stablecoins (ARTs and EMTs)

Commencing June 30, issuers of ART and EMT will be required to provide sustainability disclosures. By the year’s end, crypto service providers must also start requesting these disclosures as part of the new mandates.

Why now?

MiCA emerges at a time when crypto has significantly evolved beyond its “Wild West” reputation. The sector has transformed into a multi-trillion-dollar industry with tangible effects on finance, technology, and even geopolitics.

However, its rapid expansion has revealed vulnerabilities—scams, volatile markets, and insufficient investor protection. MiCA tackles these challenges directly by emphasizing key objectives.

Non-compliance with MiCA’s stipulations will not be taken lightly. Companies risk substantial fines, and those failing to meet compliance may face operational bans across the EU.

For some entities, this necessitates a complete strategy overhaul. Conversely, for others, MiCA represents an opportunity to operate within one of the most secure and transparent crypto markets globally.

How crypto companies are adapting to MiCA

The implementation of MiCA regulations has prompted a surge of activity within Europe’s cryptocurrency sector. Companies are adapting to the new framework, with some acquiring licenses to function under the stricter rules, while others grapple with compliance uncertainties.

Four companies have secured their MiCA licenses in the Netherlands, allowing them to operate throughout the EU’s 27 member states. These licenses were issued by the Dutch Authority for the Financial Markets. The companies include:

  • MoonPay, a crypto payment platform, enabled to provide its services across the EU.
  • BitStaete, a digital asset management firm, which can expand its outreach to institutional and retail investors.
  • ZBD, a fintech entity utilizing Bitcoin’s Lightning Network for rapid and low-cost transactions.
  • Hidden Road, a prime brokerage and clearing firm focused on institutional crypto services.

These four companies join the ranks of firms like Circle and Socios.com in securing regulatory approval through the EU’s latest framework.

However, not all companies have navigated the transition under MiCA smoothly. In mid-December, U.S.-based crypto exchange Coinbase delisted Tether (USDT), citing compliance concerns with MiCA’s stipulations.

Despite the delisting, USDT continues to be available on other European exchanges, although its market capitalization has seen a decline of over 1% since MiCA’s enactment. USDT’s market cap, which stood at $141 billion on December 19, has dropped to $137.5 billion as of January 8.

The absence of clear regulatory guidance from EU authorities has left numerous exchanges in a wait-and-see stance regarding USDT’s compliance.

Tether, as the leading stablecoin issuer, faces increasing scrutiny concerning its reserve transparency. The influence of MiCA on its operations and those of similar issuers remains a significant focus as the regulation unfolds.

Expert insights: What MiCA means for crypto companies

With MiCA now fully implemented, crypto companies across the EU are preparing for changes. To glean deeper insights into the practical challenges and opportunities ushered in by this landmark regulation, crypto.news consulted industry leaders who shared their perspectives on the immediate ramifications, long-term effects, and potential hurdles in execution. Here’s what they conveyed.

Operational and financial overhaul

The enactment of MiCA imposes considerable demands on crypto companies, requiring substantial alterations to their internal operations. From compliance enhancements to resource reallocations, the regulation compels businesses to restructure in order to conform to its requirements, rendering the process costly.

Daria Morgen, Head of Research at Changelly, emphasized the scope of these changes.

In a similar vein, Chuck Zhang, CFO at PolyFlow, pointed to the financial strain tied to these adaptations.

For firms registered in nations like Poland and Czechia, which previously embraced relatively lenient registration processes, the challenges become even more pronounced. Slava Demchuk, CEO of AMLBot, elaborated on this.

Relocation vs. retention

MiCA’s expansive framework has ignited discussions regarding whether crypto firms might transfer operations to less regulated regions such as the UAE, UK, or USA. The decision to remain or relocate often depends on the size and resources of the business.

Morgen posited that the EU’s stability will likely retain established players, despite the attraction of more favorable regulatory environments.

Zhang concurred but acknowledged the difficulties smaller firms encounter.

MiCA’s effect on innovation

A pivotal question is whether MiCA will hinder or encourage innovation within the EU. While some view the regulation as a pathway to stability, there are concerns it might dissuade experimentation, particularly for startups with limited resources. Morgen underscored this dual-edged perspective.

Zhang added that while regulatory clarity is advantageous, excessive regulation could lead to unintended repercussions.

Friction in implementation

Although MiCA strives to harmonize crypto regulations across the EU, its effectiveness hinges on how well member states align with the framework. Experts anticipate delays and inconsistencies in its rollout, potentially resulting in an uneven compliance landscape. Morgen highlighted the challenges larger companies might face.

Zhang drew attention to the absence of precedent and expertise, which introduces another layer of complexity.

A long road ahead

Ultimately, MiCA’s influence on Europe’s crypto sector will depend on how adeptly companies adapt and how consistently the regulation is enforced across member states.

MiCA will standardize compliance requirements across the EU, representing significant progress. However, many smaller VASPs may struggle to survive the transition, particularly those in nations where lenient registration processes previously existed.

While the long-term benefits of MiCA include enhanced clarity and stability, the journey to compliance is filled with obstacles. Whether the EU can achieve the right balance between oversight and innovation will determine how this regulation shapes the future of the crypto industry.