When the Markets in Crypto Assets Regulation (MiCA) became operational, it achieved a milestone the European digital asset sector had chased for years: establishing a single, consistent rulebook.
For the initial time, any crypto asset service provider (CASP) licensed inside one Member State can passport its offerings throughout the European Union and European Economic Area, while customers across the region can choose among an expanding group of regulated, supervised entities. That represents an authentic victory, and one the sector ought not take for granted.
As the consultation regarding the MiCA evaluation closes, attention must now center on calibration: preserving what functions properly, and admitting plainly where compliance obligations have expanded quicker than the risks they target.
The value of a unified market
Begin with what MiCA managed correctly. Prior to its arrival, a business wanting to function across Europe confronted a patchwork of national systems, varying registration demands, and, within specific markets, no tailored framework at all.
A consolidated marketplace alters the economics of launching a serious enterprise. It allows providers to invest in a single authorization and compliance structure rather than 30 separate ones, and it delivers something customers genuinely value: options among multiple competitors vying on quality, cost, service, and security, all measured against a shared benchmark.
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Passporting serves as the mechanism that converts 30 fragmented markets into one addressable market encompassing roughly 450 million individuals, and it stands out as the primary justification for an internationally mobile industry to establish operations inside Europe instead of elsewhere.
Consultation on MiCA’s review closes Sept. 30. Source: European Commission
MiCA has elevated entry barriers by implementing a stricter authorization and compliance structure. Conversely, an authorized CASP secures access not merely to one Member State, but to the entire EU single market.
The pertinent question for the assessment is consequently whether market access obligations remain proportional to the scale of the market they unlock.
Regulate the risk, not the activity
The principle that ought to steer this review is clear: regulation should apply wherever genuine threats to market participants or financial stability exist, remaining proportionate to those risks.
Where an operation involves client funds, asset custody, market integrity, or financial stability, stringent rules are not only acceptable but essential. Supervisory focus belongs precisely there, and that is where the sector has the minimal grounds for complaint.
Compliance frameworks should ultimately be evaluated by a single metric: do they meaningfully mitigate risk?
Over time, frameworks tend to accumulate mandates, reporting demands, and documentation duties, frequently introducing complexity and expenses without an equivalent benefit in risk reduction.
Related: MiCA focus shifts from rulemaking to supervision, ESMA chair says
A review should therefore scrutinize every requirement and maintain only those targeting clear, material risks. Rules passing that test should remain. Those failing should be simplified, streamlined, or discarded. Proportionality is not a loophole; it is the discipline sustaining a credible rulebook.
Be honest about the cost curve
It must be stated plainly that compliance expenses for CASPs have escalated notably under MiCA. That circumstance is not, by itself, a criticism. A portion of that expense represents the price of admission to a vast and lucrative market, and a well-managed enterprise should stand ready to pay it. However, cost is not a neutral factor for the marketplace overall.
Compliance overhead weighs heaviest on smaller firms and recent entrants, precisely the participants propelling competition and innovation. When fixed authorization costs rise high enough, they cease being safeguards and transform into barriers to entry, entrenching established players and narrowing the choices the single market was designed to broaden.
The threat to monitor is thus not any individual rule, but the cumulative trajectory. If the evaluation adds substantially to regulatory burdens without clear, risk-based justifications, the probable outcome is a smaller market rather than a safer one: diminished innovation and fewer entities willing to build within Europe.
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Digital asset enterprises are exceptionally mobile, and some might gradually redirect fresh investments toward jurisdictions offering comparable market access with reduced friction. If that occurs, European consumers ultimately experience fewer choices, while European regulators oversee a shrinking portion of a global activity persisting regardless.
What a good review looks like
None of this advocates for deregulation. It argues for an evaluation centered on proportionality: leveraging this chance to examine requirements generating expenses without matching benefits, granting firms space to innovate and build, and questioning constantly whether a specific obligation protects the marketplace or merely taxes it. Several illustrations clarify the point:
- Tiered regulation by size and risk: A small startup supporting a limited clientele should not encounter identical compliance hurdles and prudential mandates as a multinational corporation managing billions in assets. Implementing proportional tiers grounded in asset volumes, client bases, or systemic importance would lower entry barriers for emerging entities while upholding robust oversight where it counts most.
- Dual licensing for e-money tokens: Custody and transfer of EMTs can trigger supplementary regulations, such as the Payment Services Directive (PSD2), layered atop MiCA licensing. This overlap generates duplicate compliance expenses and legal ambiguity absent clear consumer protection advantages. A sharper delineation—or a unified licensing pathway—would mitigate friction while maintaining supervisory reach.
Payment Services Directive. Source: ECB
- Rigid reserve requirements for stablecoins: Issuers must maintain a minimum of 30% of reserves in bank deposits. Within a rising-rate climate, this restricts yield potential; during banking crises, it concentrates counterparty exposure. A more flexible allocation framework—one permitting high-quality liquid assets beyond bank deposits—could enhance resilience without impairing redemption capabilities.
Europe has forged something rare: an expansive, consolidated, and credibly regulated marketplace for crypto assets. The objective now is maintaining its appeal for the businesses driving its success.
Getting this balance right serves everyone’s interests, regulators and industry alike, and the upcoming months represent the ideal window to achieve it.
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Originally published at https://cointelegraph.com/opinion/a-single-market-worth-protecting-getting-the-mica-review-right?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound.
