The European Union’s flagship Markets in Crypto-Assets (MiCA) regulation was introduced with the promise of creating a unified crypto market. Less than a year after its rollout, however, diverging national approaches are raising questions about whether the law can deliver on its ambitious goals.
A Unified Market Under Strain
MiCA was designed to simplify operations for crypto companies by introducing a single licensing system across all 27 EU member states. In principle, once a firm is licensed in one country, it should be able to “passport” its services across the bloc without dealing with a patchwork of national rules.
Yet, regulators in countries including France, Italy, and Austria have expressed concerns that the system could encourage companies to choose jurisdictions with lighter oversight. This practice, known as regulatory arbitrage, risks undermining the credibility of MiCA’s single licence framework.
Echoes of Past Regulatory Competition
Jerome Castille, head of compliance and regulatory affairs for Europe at CoinShares, noted that regulatory competition in Europe has long been a challenge.
“We saw retail trading platforms flock to Cyprus and Malta under MiFID. With MiCA, the expectation was that this time it would be different. But again, we kind of see firms choosing jurisdictions seen as more accommodating. And if people start thinking that not all licences are equal, then the whole single market promise goes away,” Castille explained.
The problem, he argued, is not a lack of rules but inconsistency in their enforcement. “Europe already has a very high level of investor protection and probably the highest globally. The real issue right now is ensuring that MiCA is fully implemented. Without formal guidance, national regulators are making their own call. That’s where divergence or even regulatory arbitrage comes from. If we get that right, the market becomes both safe and attractive for global players. If we don’t, innovation will look elsewhere.”
Smaller Firms Struggle to Keep Pace
While large companies stand to benefit from easier access to the EU’s single market, smaller firms are finding the transition more difficult. Marina Markezic, executive director of the European Crypto Initiative, highlighted the challenges for startups.
“It is very intense to be compliant in a very short amount of time,” she said. “For the biggest ones, having one single access to the whole European Union market is really positive. But unfortunately, for the smaller companies, it’s a really big burden and they might not survive this process.”
The uneven capacity of regulators across Europe is also a concern. Markezic pointed out that some national authorities are better resourced and more experienced than others, which may lead to inconsistent supervision.
A Critical Test for Europe
As Europe seeks to position itself as a global leader in crypto regulation, the effectiveness of MiCA will depend on whether its rules are applied evenly across all member states. With 27 different regulators overseeing the same framework, the pressure to maintain consistency is high.
Markezic stressed that this is a real test for the bloc. “Some are bigger, some smaller, some more experienced, some less. It’s really a test for Europe to see if we’re able to supervise consistently,” she said.
Looking Ahead
The early signs suggest that MiCA’s promise of a harmonised market is at risk of being diluted by national differences. For global players, Europe could still offer a safe and attractive environment if regulators align their approaches. For smaller firms, however, the regulatory burden may prove overwhelming.
The success of MiCA will ultimately depend on whether European authorities can balance investor protection with consistent implementation. If they succeed, Europe may consolidate its position as a leading hub for digital assets. If not, innovation may shift to more flexible markets abroad.
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