Since its enaction two months ago, the Markets in Crypto-Assets (MiCA) regulation has created a cohesive framework and clear standards for digital asset issuers across the European Union (EU). The model aims to balance innovation and consumer protection, creating greater pathways for crypto adoption.

BeInCrypto spoke with Monerium, Moonpay, OKX, and Yellow Network experts to further understand what this unprecedented regulation means for EU-based crypto users and the challenges that remain for firms looking to set up shop in the region. 

The EU Sets a Global Precedent

On December 30, 2024, the European Union made history by becoming the first region in the world to enact a widespread crypto regulation. 

Crypto companies wanting to operate in the EU can obtain a single MiCA license to offer services across all member states, avoiding the hassle of getting separate permits for each country.

“MiCA‬‭ sets‬‭ a‬‭ global‬‭ benchmark‬‭ as‬‭ the‬‭ most‬‭ extensive‬‭ regulatory‬‭ framework‬‭ for‬‭ crypto‬‭ assets‬‭ to‬‭ date,‬‭ positioning‬‭ the‬‭ EU‬‭ as‬‭ a‬‭ leader‬‭ in‬‭ shaping‬‭ the‬‭ future‬‭ of‬‭ digital‬‭ finance and providing a blueprint for other jurisdictions to follow,” Erald Ghoos, CEO OF OKX Europe, told BeInCrypto.

Several regional crypto firms have already applied for MiCA and received licenses. Less than two weeks ago, Crypto.com became the first global crypto platform to receive full approval under the EU’s regulatory framework.

At the beginning of January, MoonPay, BitStaete, ZBD, and Hidden Road secured the MiCA license from the Dutch Authority for the Financial Markets (AFM). Standard Chartered closely followed suit when it gained its license in Luxembourg. Meanwhile, Boerse Stuttgart Digital Custody became Germany’s first crypto asset service provider to receive a full license.

MiCA Unified Licensing Regime

The crypto market has expanded considerably since Bitcoin’s launch over 15 years ago. Despite this growth, a consistent and comprehensive regulatory structure is still lacking in many parts of the world. This absence of clear rules can expose investors to risks and create vulnerabilities in consumer protection and market integrity.

The EU’s MiCA framework is designed to address these challenges while simultaneously promoting responsible growth within the cryptocurrency industry.

“Clear‬‭ rules‬‭ create‬‭ a‬‭ more‬‭ predictable‬‭ environment‬‭ where‬‭ serious‬‭ players‬‭ can‬‭ thrive.‬‭ MiCA‬‭ is‬‭ essentially‬‭ giving‬‭ the‬‭ green‬‭ light‬‭ for‬‭ the‬‭ next‬‭ chapter of crypto in Europe,” explained Alexis Sirkia, Co-Founder of Yellow Network. 

MiCA’s standardized licensing process across the EU simplifies regulatory requirements and makes it easier for companies to operate within the European Economic Area. This framework also provides official recognition for the cryptocurrency industry.

“One‬‭ of‬‭ the‬‭ biggest‬‭ advantages‬‭ of‬‭ MiCA‬‭ is‬‭ its‬‭ role‬‭ in‬‭ legitimizing‬‭ the‬‭ crypto‬‭ asset‬‭ industry,‬‭ for‬‭ both‬‭ consumers‬‭ and‬‭ other‬‭ companies,‬‭ given‬‭ its‬‭ requirements‬‭ and‬‭ regulatory‬‭ standards.‬‭ This‬‭ should‬‭ consequently‬‭ help‬‭ build‬‭ confidence‬‭ in‬‭ MiCA-regulated firms,” Matt Sullivan, Deputy‬‭ General‬‭ Counsel‬‭ and Head of Ireland at MoonPay‬, told BeInCrypto. 

The legislation also specifically works toward safeguarding the interests of consumers by keeping associated risks at bay and enhancing trust. 

“MiCA enhances consumer protection through robust transparency‬ requirements, stringent compliance measures, and oversight of stablecoin issuers. It‬‭ also strengthens anti-money laundering (AML) and Know Your Customer (KYC)‬ protocols, creating a safer, more secure, and trustworthy environment for market‬ participants. This comprehensive framework paves the way for broader adoption and‬‭ sustainable growth of the crypto ecosystem across Europe,‭” added Ghoos. 

‭Despite its long list of advantages, MiCA’s framework also raises some considerations, particularly for smaller players.

A Rigorous Process

Compared to frameworks developed by other jurisdictions, MiCA’s legislation is particularly thorough.

“MiCA‬‭ is‬‭ definitely‬‭ one‬‭ of‬‭ the‬‭ most‬‭ detailed‬‭ and‬‭ stringent‬‭ frameworks‬‭ out‬‭ there.‬‭ While‬‭ places‬‭ like‬‭ Singapore‬‭ and‬‭ Hong‬‭ Kong‬‭ focus‬‭ on‬‭ fostering‬‭ innovation‬‭ with‬‭ lighter-touch‬‭ regulations,‬‭ MiCA‬‭ is‬‭ all‬‭ about‬‭ building‬‭ trust‬‭ and‬‭ security.‬‭ It’s‬‭ a‬‭ different‬‭ approach‬‭ and‬‭ less‬‭ about‬‭ speed‬‭ and‬‭ more‬‭ about‬‭ laying‬‭ down‬‭ a‬‭ solid‬‭ foundation,” said Sirkia. 

Securing a MiCA license involves a step-by-step procedure. Crypto firms must first assess their eligibility and prepare all relevant documentation. Once submitted, the application undergoes a compliance review by the applicable regulatory authority. 

“‬‭It‬‭ will‬‭ become‬‭ more‬‭ difficult‬‭ for‬‭ the‬‭ classic‬‭ example‬‭ of‬‭ two‬‭ individuals‬‭ with‬‭ a‬‭ novel‬‭ idea to simply launch their crypto service or token to the public,” Sullivan said.‭

It might also create certain barriers to entry.

Obstacles for Smaller Players

This process can be particularly burdensome for small players or newer crypto firms seeking services in the European Union.

“‬‭While‬‭ MiCA‬‭ brings‬‭ much-needed‬‭ regulation,‬‭ it‬‭ also‬‭ introduces‬‭ higher‬‭ compliance‬‭ costs‬‭ and‬‭ operational‬‭ burdens,‬‭ particularly‬‭ for‬‭ smaller‬‭ crypto‬‭ businesses.‬‭ Companies‬‭ will‬‭ have‬‭ to‬‭ navigate‬‭ complex‬‭ reporting‬‭ requirements,‬‭ stringent‬‭ capital‬‭ reserves‬‭ for‬‭ stablecoin‬‭ issuers, and strict disclosure obligations,” Ghoos explained.

‭The framework also requires companies to have a base of operations in the EU.

“For‬‭ smaller‬‭ players,‬‭ the‬‭ requirements,‬‭ such‬‭ as‬‭ maintaining‬‭ a‬‭ physical‬‭ presence‬‭ in‬‭ the‬‭ EU‬‭ and‬‭ holding‬‭ significant‬‭ capital‬‭ reserves,‬‭ can‬‭ feel‬‭ like‬‭ a‬‭ high‬‭ hurdle.‬‭ It‬‭ risks‬‭ shutting‬‭ out‬‭ startups‬‭ that‬‭ could‬‭ bring‬‭ fresh‬‭ ideas‬‭ to‬‭ the‬‭ table,” said Sirkia.

Some critics have said that this sort of regulation favors established crypto firms, creating barriers to entry for newer players. Larger companies with sufficient resources to overcome these obstacles do so anyway, given the significant opportunities of operating across such a large region.

“‬‭Those‬‭ who‬‭ manage‬‭ to‬‭ navigate‬‭ the‬‭ regulations‬‭ will‬‭ find‬‭ themselves‬‭ in‬‭ a‬‭ more‬‭ secure‬‭ and‬‭ stable‬‭ environment,‬‭ with‬‭ access‬‭ to‬‭ a‬‭ massive‬‭ market‬‭ of‬‭ 450‬‭ million‬‭ people. It’s a challenge, yes, but it could also be a badge of legitimacy,” Sirkia said. 

Beyond this, the MiCA regulation has also presented concerns regarding user privacy.

KYC Requirements Generate Privacy Concerns

MiCA implements AML and KYC protocols to create a safer, more secure, and trustworthy environment for market‬ participants. However, it also raises some security concerns for users.

“On‬‭ the‬‭ user‬‭ side,‬‭ there’s‬‭ concern‬‭ about‬‭ privacy.‬‭ The‬‭ stricter‬‭ KYC‬‭ rules,‬‭ while‬‭ aimed‬‭ at‬‭ security,‬‭ could‬‭ make‬‭ some‬‭ people‬‭ uneasy‬‭ about‬‭ how‬‭ their‬‭ data‬‭ is‬‭ handled,” Sirkia said. 

The extensive data collection and storage required by Know Your Customer (KYC) regulations conflict with individual privacy rights, raising concerns about data security, potential misuse, and unauthorized access.

“MiCA’s‬‭ KYC‬‭ rules‬‭ are‬‭ designed‬‭ to‬‭ prevent‬‭ fraud‬‭ and‬‭ boost‬‭ security,‬‭ but‬‭ they‬‭ do‬‭ raise‬‭ eyebrows‬‭ when‬‭ it‬‭ comes‬‭ to‬‭ privacy.‬‭ Collecting‬‭ and‬‭ storing‬‭ so‬‭ much‬‭ personal‬‭ data‬‭ creates‬‭ risks.‬‭ What‬‭ happens‬‭ if‬‭ that‬‭ data‬‭ is‬‭ hacked‬‭ or‬‭ misused?‬‭ Users‬‭ who‬‭ value‬‭ their‬‭ privacy‬‭ might‬‭ turn‬‭ to‬‭ less‬‭ regulated‬‭ platforms,‬‭ which‬‭ is‬‭ exactly‬‭ what‬‭ MiCA‬‭ is‬‭ trying‬‭ to‬‭ avoid.‬‭ It’s‬‭ a‬‭ fine‬‭ line‬‭ to‬‭ walk,‬‭ and‬‭ how‬‭ the‬‭ EU‬‭ handles these concerns will be critical in building user trust,” Sirkia added.‬

‭Looking past these concerns, the most debated aspect of MiCA has been its regulation of stablecoins.

Stablecoin Issuers Face Significant Hurdles

Stablecoins are cryptocurrencies designed to maintain a stable value, typically by being pegged to another asset like gold or fiat currency. This makes them popular with investors seeking to engage with digital assets while mitigating price volatility.

The stringent nature of MiCA’s stablecoin regulations has been a key point of contention.

“MiCA‬‭ will‬‭ require‬‭ all‬‭ stablecoin‬‭ issuers‬‭ to‬‭ maintain‬‭ more‬‭ than‬‭ 1:1‬‭ backing‬‭ with‬‭ liquid‬‭ reserves‬‭ and‬‭ obtain‬‭ proper‬‭ authorization‬‭ as‬‭ electronic‬‭ money‬‭ institutions.‬‭ This‬‭ will‬‭ particularly‬‭ impact‬‭ unauthorized‬‭ stablecoin‬‭ issuers‬‭ who‬‭ have‬‭ been‬‭ operating‬‭ in‬‭ Europe‬‭ without‬‭ the‬‭ appropriate‬‭ e-money‬‭ licenses,‬‭ as‬‭ they’ll‬‭ need‬‭ to‬‭ either‬‭ comply‬‭ with‬‭ these‬‭ stricter‬‭ requirements‬‭ or‬‭ cease‬‭ operations‬‭ in‬‭ the‬‭ EU,” Jón‬‭ Helgi‬‭ Egilsson‬‭, Co-Founder of Monerium and former Chairman of the Central Bank of Iceland, told BeInCrypto. 

To that point, Sirkia added:

“Stablecoins‬‭ are‬‭ going‬‭ to‬‭ feel‬‭ the‬‭ MiCA‬‭ effect‬‭ in‬‭ a‬‭ big‬‭ way.‬‭ Issuers‬‭ will‬‭ need‬‭ to‬‭ step‬‭ up‬‭ their‬‭ game‬‭ with‬‭ more‬‭ transparency‬‭ and‬‭ stronger‬‭ reserves.‬‭ For‬‭ USDC,‬‭ which‬‭ already‬‭ operates‬‭ under‬‭ a‬‭ pretty‬‭ robust‬‭ framework,‬‭ the‬‭ transition‬‭ might‬‭ be‬‭ smoother.‬‭ But‬‭ for‬‭ others,‬‭ like‬‭ USDT,‬‭ it‬‭ could‬‭ mean‬‭ more‬‭ scrutiny‬‭ and‬‭ possibly‬‭ some‬‭ big‬‭ adjustments.”

As soon as MiCA took effect, Tether’s USDT experienced a $2 billion drop in market capitalization– the biggest since the FTX collapse. Even before MiCA’s enactment, centralized exchanges like Coinbase began restricting USDT, while EU exchanges were directly ordered to delist the stablecoin en masse.

While USDT hasn’t yet met MiCA’s stablecoin regulation, its criteria have sparked debate. Some critics argue that they give traditional financial institutions a considerable advantage.

Three days before MiCA’s launch, Tether CEO Paolo took to social media to call out the framework’s requirements for stablecoin issuers.

“MiCA is nothing but a massive gift to the traditional banking system. Forcing stablecoin issuers to hold >30% of their liquidity in banks only ensures more profits for the legacy players. Its regulation designed to benefit the old system, not innovation,” read Diomede’s X post. 

Egilsson explained that this policy significantly influences banks over their competitors’ operations and licensing.

“In‬‭ extreme‬‭ cases‬‭ stablecoin‬‭ issuers‬‭ will‬‭ have‬‭ to‬‭ safeguard‬‭ up‬‭ to‬‭ 60%‬‭ of‬‭ funds‬‭ with‬‭ up‬‭ to‬‭ 12‬‭ commercial‬‭ banks.‬‭ Placing‬‭ banks‬‭ as‬‭ intermediaries‬‭ is‬‭ like‬‭ handing‬‭ them‬‭ the‬‭ keys‬‭ as‬‭ gatekeepers‬‭ to‬‭ monitor‬‭ their‬‭ competitors‬‭ and‬‭ determine‬‭ if‬‭ their‬‭ competitors‬‭ will‬‭ get‬‭ a‬‭ license‬‭ to‬‭ operate‬‭ since‬‭ a‬‭ business‬‭ relationship‬‭ with‬‭ multiple‬‭ banks‬‭ is‬‭ now‬‭ a‬‭ requirement‬‭ by‬‭ EU‬‭ law‬‭ under‬‭ MiCA,” he said. 

Using traditional banks as intermediaries between stablecoin providers and consumers directly also opposes the idea of decentralization, according to Egilsson.

“‭It‬‭ is‬‭ simply‬‭ absurd‬‭ and‬‭ a‬‭ misuse‬‭ of‬‭ public‬‭ EU‬‭ legislation‬‭ power‬‭ in‬‭ order‬‭ to‬‭ try‬‭ to‬‭ preserve‬‭ the‬‭ status‬‭ quo‬‭ for‬‭ EU‬‭ banks.‬‭ To‬‭ demand‬‭ banks‬‭ to‬‭ be‬‭ intermediaries‬‭ doesn’t‬‭ align‬‭ with‬‭ either‬‭ the‬‭ ethos‬‭ of‬‭ web3‬‭ or‬‭ is‬‭ it‬‭ a‬‭ fair‬‭ playing‬‭ field‬‭ that‬‭ would facilitate innovation,” he told BeInCrypto.

Egilsson also pointed out that USDT continues to operate within the European Union despite MiCA being in effect. 

“Before‬‭ MiCA‬‭, stablecoin‬‭s fell‬‭ under‬‭ EU‬‭ law‬‭ as‬‭ e-money,‬‭ but‬‭ EU‬‭ legislators‬‭ did‬‭ not‬‭ enforce‬‭ it. The‬‭ promise‬‭ made‬‭ by‬‭ EU‬‭ legislators‬‭ was‬‭ that‬‭ enforcement‬‭ will‬‭ now‬‭ follow.‬‭ Yet,‬‭ the‬‭ legislation‬‭ has‬‭ taken‬‭ effect,‬‭ but‬‭ unauthorized‬‭ stablecoins‬‭ continue‬‭ to‬‭ be‬‭ offered.‬‭ Regulation‬‭ is‬‭ one‬‭ thing,‬‭ enforcement‬‭ is‬‭ another.‬‭ If‬‭ enforcement‬‭ remains‬‭ as‬‭ lax‬‭ as‬‭ it‬‭ was‬‭ before‬‭ MiCA,‬‭ one‬‭ might‬‭ ask:‬‭ why‬‭ bother‬‭ regulating at all?‬” he said. 

‭Regardless, Tether’s lack of full MiCA compliance creates risks, such as potential penalties, fines, or even an EU-based ban on USDT.

MiCA and the Future of Crypto Regulation

Despite certain pain points, most industry experts believe MiCA is a groundbreaking piece of legislation that could inspire similar regulations in other jurisdictions. 

Given that the framework has only been in effect for a little over two months, the likelihood that it will be revised in the future is high– especially considering that the crypto industry is under a constant state of transformation.

“All‬‭ regulations‬‭ evolve,‬‭ and‬‭ MiCA‬‭ will‬‭ likely‬‭ be‬‭ no‬‭ different.‬‭ This‬‭ evolution‬‭ could‬‭ be‬‭ driven‬‭ by‬‭ increased‬‭ crypto‬‭ adoption,‬‭ but‬‭ it‬‭ could‬‭ also‬‭ be‬‭ driven‬‭ by‬‭ other‬‭ factors such as technological progress.‬‭ To‬‭ use‬‭ payment‬‭ regulation‬‭ as‬‭ an‬‭ example‬‭ of‬‭ natural‬‭ regulatory‬‭ progression,‬‭ the‬‭ EU‬‭ is‬‭ currently‬‭ preparing‬‭ the‬‭ third‬‭ Payment‬‭ Services‬‭ Directive‬‭ (PSD3),‬‭ a‬‭ natural‬‭ evolution‬‭ of‬‭ the‬‭ earlier‬‭ payment‬‭ directives,‬‭ PSD‬‭ and‬‭ PSD2,” Sullivan noted.

As Web3 evolves and new technologies emerge, MiCA must be updated to address them.

“The‬‭ crypto‬‭ space‬‭ moves‬‭ fast,‬‭ and‬‭ the‬‭ framework‬‭ will‬‭ need‬‭ to‬‭ keep‬‭ up.‬‭ As‬‭ adoption‬‭ grows‬‭ and‬‭ new‬‭ technologies‬‭ like‬‭ DeFi‬‭ and‬‭ NFTs‬‭ become‬‭ more‬‭ mainstream,‬‭ we’ll‬‭ likely‬‭ see‬‭ updates‬‭ to‬‭ address‬‭ these‬‭ areas.‬‭ The‬‭ EU‬‭ has‬‭ set‬‭ the‬‭ bar‬‭ high‬‭ with‬‭ MiCA,‬‭ but‬‭ staying‬‭ relevant‬‭ in‬‭ a‬‭ constantly‬‭ evolving‬‭ industry‬‭ will‬‭ require‬‭ ongoing‬‭ dialogue‬‭ with‬‭ the‬‭ crypto‬‭ community and flexibility in the regulatory approach,” said Sirkia. 

If other countries adopt similar regulations, the EU may revise MiCA to remain competitive.

“As‬‭ other‬‭ jurisdictions‬‭ develop‬‭ their‬‭ own‬‭ crypto‬‭ laws,‬‭ the‬‭ EU‬‭ may‬‭ refine‬‭ MiCA‬‭ to‬‭ remain‬‭ competitive‬‭ and‬‭ aligned‬‭ with‬‭ global‬‭ standards,‬‭ ensuring‬‭ that‬‭ Europe‬‭ continues‬‭ to‬‭ be‬‭ a‬‭ leader‬‭ in‬‭ crypto‬‭ regulation,” Ghoos explained.

In the future, a collaboration between industry players and regulators will be crucial in ensuring that these frameworks continue to protect consumers while developing an environment that fosters innovation.