Regulation
How Cryptocurrency Firms Are Capitalizing on MiCA’s Bumpy Launch – DL News
- The MiCA licensing regime will come into force at the end of December.
- Levels of severity vary from country to country.
- This will create opportunities for companies to engage.
Stablecoin laws have already come into force, but EU countries are rushing to comply with the rest of the Union’s new cryptocurrency regulation before the deadline.
The EU regulatory framework requires cryptocurrency businesses such as exchanges to choose a country in which to apply for a license. In practice, countries will inevitably have different levels of stringency.
The Markets in Crypto-Assets regulation is designed to introduce a level playing field across the EU, as national regulators will have to adhere to the same set of standards. Once licensed, crypto-asset service providers, or CASPs, can move their services anywhere in the bloc.
Additionally, countries are allowed to opt for longer transition periods before enforcing the MiCA rules. This is known as the grandfathering period.
All of this could call into question the level of compliance in some countries.
— Ernest Lima, XReg Consulting
That creates opportunities for cryptocurrency firms to seek out jurisdictions with lighter rules and less enforcement, said Ernest Lim, a partner at consultancy XReg. DL News.
“Cryptocurrency companies registered or licensed in different EU member states may be subject to different requirements” between January 2025 and July 2026, Lima said.
Due to time and capacity constraints, some local regulators may have difficulty processing applications in time for the deadline, he added.
“Some may not even have sufficient resources to adequately supervise licensed CASPs,” Lima said.
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“All of this could call into question the level of compliance in some countries.”
Companies are already exploiting the patchy way MiCA regulations are enforced in the EU, in a practice known as regulatory arbitrage, Lima said.
Just the beginning
MiCA’s stablecoin laws went into effect on July 1st, marking the start of the launch.
The next stage is the MiCA licensing regime for cryptocurrency businesses, including exchanges, custodians and investment firms, which will come into force on December 30.
Although the new rules will be stricter, CASPs registered in one country will be able to offer their services throughout the EU27 under the MiCA ‘passporting’ provisions.
Some countries with simpler registration requirements already have significant numbers of VASPs on their registers.
Lima said he expects the number of CASPs in Europe to consolidate significantly, especially in those countries.
In countries with more flexible regulators, companies can benefit from a relatively simple registration process to enter Europe.
According to XReg data, for example, Lithuania has 588 VASPs, while Germany has 12.
Transition period
The MiCA safeguard period will also impact where companies apply for licenses, Lima said.
The grandfathering period is a transition starting on December 30, during which companies can switch to the more stringent CASP regime.
Countries can grant cryptocurrency firms up to 18 additional months from December 30, although the EU securities watchdog recommends a 12-month safeguard period.
In assessing how much time to give companies to transition to the CASP regime, countries will have considered “how prepared they are internally to process applications, the gap between MiCA and their current regime, and the number of companies currently registered in their jurisdictions, all of which influence the workload associated with the transition,” Lima said.
Some countries have announced their transition, others have not, he added.
Among those who have announced:
- France will allow a ramp-up period of 18 months. The country already has a regime similar to MiCA in place.
- Many countries, including Ireland, Germany, Spain and Austria, are opting for the recommended 12-month transition.
- Lithuania, which has very lax AML requirements and a large number of registered VASPs, has been at a standstill for five months.
- The Netherlands will implement the MiCA regime on 30 December and is already accepting applications.
Strategie
Lima said that cryptocurrency companies are evaluating different strategies to take advantage of this uneven distribution.
Some companies are aiming to comply as soon as possible, by December 30, which means they will be the first to avail themselves of passporting rights and gain market share in the EU.
“Others are opting to file multiple applications in EU jurisdictions,” he said.
This approach allows a firm to benefit from a transition period in a trusted jurisdiction while working on a MiCA application.
However, he said that time was running out: local regulators were preparing to start the MiCA application process.
“Soon there will be no more time to process new applications.”
Lima said some companies have no intention of ever complying with MiCA.
Instead, they chose to continue working as long as possible before closing their businesses for good.
Contact the author at joanna@dlnews.com.