MiCA Regulation: The EU Crypto rule that could stall innovation

As everyone in the industry knows, after several years of negotiations, the MiCA Regulation (Markets in Crypto-Assets) finally came into full effect on 30 December 2024, making Europe the first major jurisdiction to comprehensively regulate cryptoassets.

What is MiCA trying to do?

To make sure that across the 30 countries of the European Economic Area there is one single set of rules for the most common crypto activities:

• token issuance,

• operation of trading/exchange platforms,

• custody and wallet services,

• and, above all, stablecoins.

What actually changes

Until now, companies had to design their operations around each country’s local rules. With MiCA, any firm that wants to offer crypto-asset services in the EU can apply for a CASP (Crypto-Asset Service Provider) licence and get an EU passport to operate across the whole EEA.

And that licence is not just a formality. It asks for requirements that look much more like traditional finance than a crypto startup:

• minimum capital and own funds,

• governance and risk controls,

• transparent information in the whitepaper,

• and being placed under the supervision of the national financial authority.

  
  

Stablecoins under MiCA: the most sensitive piece

Within MiCA there’s a very clear target: so-called “asset-referenced tokens” and e-money tokens – in practice, the stablecoins pegged to the dollar, the euro or a basket of assets. These are the ones that can scale the fastest and, therefore, the ones most likely to make a central bank nervous.

From now on, issuing a stablecoin in the EU is no longer a matter of spinning up a random crypto structure. You need to:

• be an EU-authorised electronic money institution or a bank,

• hold real, segregated and audited reserves,

• and accept issuance/volume caps when there’s a potential financial stability risk.

Why so much pressure on stablecoins?

This isn’t accidental. The European Central Bank had been watching that most large stablecoins are created outside the EU and, on top of that, are pegged to the US dollar. From their perspective, letting a “crypto dollar” circulate freely in Europe while they’re pushing their own digital euro (CBDC) meant losing ground. MiCA is, among other things, a way of taking that control back.

MiCA as the EU’s answer to the crypto scandals

There’s also a reputational angle. After the frauds, bankruptcies and general chaos of 2022 (FTX, projects collapsing, customers left without funds), the EU needed to show that this wasn’t going to happen again in its market. MiCA is exactly that: raising the bar, adding tighter supervision and leaving very little room for opaque projects.

But once the excitement of being “the first in the world” faded, the actual rollout of MiCA in 2025 has been a bitter pill for much of the European crypto industry, especially startups and mid-sized firms.

The regulation did grant a transitional period (in some cases until the end of 2025) for existing firms to apply for their CASP licences, but between the paperwork and the cost of compliance, that breathing space is turning into an obstacle course.

By early 2025, the numbers were, at the very least, worrying: out of more than 3,000 crypto-asset providers registered in the EU, only a few dozen had actually secured authorisation under MiCA. In fact, by March 2025 only 22 firms had been approved — 12 as CASPs and 10 as e-money token issuers. The vast majority were still stuck in the process or hadn’t even started it, facing the real possibility of having to shut down operations if they don’t get approval in time.

It’s not just the companies’ fault: supervisors were late too

This situation isn’t explained only by what companies did or didn’t do. The administrative pace of several national supervisors also played a role: in some countries the MiCA-competent authority hadn’t even been formally designated on time, or the technical guidance for applying for a licence hadn’t been published yet.

A two-speed market

By mid-2025, a two-speed scenario started to emerge. On one side, a small group of firms did manage to adapt. By July 2025, around 53 entities had already secured the coveted EU-wide licence: that group included the big international exchanges (Coinbase, Kraken, Bitstamp, OKX) and also some banks and fintechs that decided to move into crypto, such as BBVA in Spain or Robinhood.

Germany and the Netherlands were leading in number of approvals, showing a stronger commitment to fast-tracking licences.

Binance and Tether: why even the giants are struggling with MiCA

At the same time, what was most striking was who wasn’t on the list: Binance (the largest exchange in the world) wasn’t there, nor was Tether, the issuer of USDT. In other words, the core of the global crypto market was still outside the European frame.

Why? Because these giants have run into serious hurdles in meeting MiCA requirements. In Tether’s case, the transparency obligations put it in an awkward spot: it has spent years saying it would publish a full audit of the reserves backing USDT, but in practice it has only shown partial attestations.

Under MiCA, that level of opacity is a major problem, and EU authorities simply won’t grant it a licence until it submits an independent audit — something Tether says it wants to do, but which the Big Four are reluctant to sign off on after so many scandals in crypto.

Binance, for its part, has a history of regulatory run-ins in Europe: in 2023–24 it had to withdraw licence applications or wind down operations in countries like Germany, the Netherlands and Cyprus due to pressure from supervisors. It is even under investigation in France for possible money laundering.

With that backdrop, it’s no surprise it hasn’t yet received the MiCA “blessing”. This absence of Binance and Tether shows that even the biggest crypto players are finding it hard to adapt to the “demanding corporate governance and transparency requirements” set out in the regulation.

Meanwhile, the exchanges that do want to comply have had to make drastic changes to the way they operate: for example, from 2024–25 Binance and Kraken delisted several stablecoins and non-compliant tokens (including suspending USDT trading for European users) to avoid breaching the new MiCA rules.

The cost of compliance hits smaller players harder

The flip side is the compliance bill for smaller firms. MiCA sets minimum capital requirements (€50k / €125k / €150k) and an operational burden that naturally benefits incumbents over startups. There are signs that part of the talent and early projects are looking for lighter jurisdictions, even if the “exodus” isn’t fully proven yet. That said, the EU has opened some pro-innovation channels (the DLT Pilot Regime and the European Blockchain Regulatory Sandbox) and Spain is keeping a transitional regime until 31/12/2025 before demanding a full MiCA licence. The real outcome will depend on how supervisors apply the rules and whether they fine-tune the burden for SMEs without lowering investor protections.

The numbers are starting to show it: according to Coincub (using LinkedIn and Web3.Career data), job postings in the EU mentioning blockchain/crypto went from over 100,000 in 2022 to under 10,000 in early 2025 — a 90% drop. While the U.S. bottomed out in 2023 and picked up again in 2024–2025, Europe is still lagging. Hiring has shifted outside the EU and is concentrating in just a few big players within the bloc.

Venture capital has also pulled back. After the 2022 peak of $5.7 billion invested in European crypto startups, funding collapsed in 2023–24 and many funds chose to move money to the U.S. or Asia, where they see a less burdensome environment. More and more investors describe Europe as a difficult place to build crypto because of regulatory weight.

So it’s not surprising that more European crypto founders are taking their projects to friendlier jurisdictions: the U.S. (with states offering clearer rules), the UK or Switzerland (more flexible frameworks) and, especially, Middle Eastern and Asian hubs like Singapore, Hong Kong or Dubai, which are actively branding themselves as crypto centres.

This talent drain — what many are already calling the crypto brain drain — is starting to worry even EU authorities, because the people leaving are exactly the ones they most want to keep: young blockchain specialists who find better salaries and more dynamic markets abroad.

The EU’s regulatory paradox

The paradox is obvious: MiCA was designed to protect users and market integrity through a single rulebook across the EU. But during the transitional period, supervisors have warned that MiCA protections don’t apply to services that haven’t yet been authorised — which means customers could be left exposed if several providers are forced to shut down at the same time for not securing approval.

In Spain, the critical moment comes when the transitional regime ends on 30/12/2025 (in some other Member States it may run until 01/07/2026). At the same time, for those that do get authorised, MiCA requires client assets to be segregated and safeguarded, complaints to be handled properly, and an orderly wind-down plan to be in place — precisely to avoid a sudden shutdown leaving funds “in limbo”. The risk of an “exit scam” doesn’t disappear (especially outside the authorised perimeter), but the framework lowers its likelihood and impact if supervision is applied rigorously.

A mass shutdown of crypto firms in the EU wouldn’t just mean losses for investors — it would trigger a wave of lawsuits and insolvencies, clogging up courts and further eroding trust in the sector. Ultimately, Europe could end up sidelined in the next wave of financial innovation. There’s already talk that, if it stays on this path, the EU risks “dropping off the list of global innovation hubs” for crypto.

The EU is walking a very fine line between being the guardian and being the executioner of innovation. Its sweeping, first-of-their-kind laws attract curiosity and admiration for their boldness — but also fierce criticism from those who see them as a short-sighted “Eurocracy” of regulation. Will Europe get the balance right? 2025 will be only the beginning of the experiment. If the AI Act manages to grow a safe, European AI ecosystem without scaring off the creative minds, and if MiCA manages to clean up the crypto market without killing it, the EU will have vindicated its model.

If not, we may see a Europe proud of its laws, but watching the tech party from outside — having guillotined its own innovative future in the name of protection. As one European business group put it, “the current approach threatens Europe’s global position” — the ball is now in the regulators’ court to prove otherwise, by adjusting where needed, before it’s too late.