Europe's MiCA rollout sparks debate over who wins under new crypto rules

The European Union's crypto market entered a new era on Wednesday as its Markets in Crypto-Assets (MiCA) regulation came into full effect, meaning crypto firms serving customers across the 27-nation bloc are required to hold a license or stop operating.

Thousands of cryptocurrency service providers face suspension and were legally obligated to stop servicing customers in the EU as of midnight, June 30, leaving millions of European users hunting for a MiCA-approved platform.

Executives and lawyers welcomed the single regulatory framework across the EU, but disagreed over whether MiCA creates a fair market. Some said the cost of compliance has made it impossible for smaller firms to operate in the country, forcing them to look elsewhere, including Dubai. Others believe the rules rightfully benefit those crypto firms that invested in transparency. Another concern is whether regulators can prevent offshore firms from continuing to serve European customers without a license.

"I believe that regulating crypto on a European level is a very positive thing," said Joseph Borg, a Maltese lawyer and partner at WH Partners who has advised crypto firms since 2016. "Regulation is necessary."

Borg, however, said the biggest challenge is no longer the law itself but how regulators are applying it. He estimates Europe could go from roughly 3,000 registered crypto asset service providers to only 300 or 400 licensed firms under MiCA — which he indicated would suit the regulators just fine

"I'm noticing that regulators are becoming more and more lazy," Borg said. "They prefer having 20 operators to regulate rather than invest in more technology and more human resources to supervise more operators."

Borg believes the growing cost of compliance is biased toward companies that can afford bigger legal and compliance teams. While MiCA itself does not intentionally favor large firms over smaller ones, he said the technical standards and supervisory expectations introduced alongside the regulation have made it harder for startups to compete.

Not everyone agrees. Alex Fazel, chief partnership officer at SwissBorg, said obtaining a MiCA license is less about company size than proving how a business operates.

"Transparency is key," Fazel said. "You cannot build trust without transparency."

SwissBorg received its MiCA license through France's financial markets regulator this year. Fazel said the licensing process required the company to document its governance, compliance procedures and operations in detail.

"A MiCA license is not something you can buy because you have money and power," he said. "It is making sure every process is fully transparent."

Still, Fazel acknowledged the new rules will be hardest on startups because obtaining and maintaining a license requires significant capital.