As EU rules tighten, the MiCA regime will put smaller crypto companies under pressure.
EU markets are entering the final phase of the Crypto Assets Regulation (MiCA) transition period, which will force smaller crypto firms across Europe to quickly secure licenses or prepare to shut down regulated services. The transition period ends in the EU on July 1, after which any crypto asset service provider operating without an MCA license must stop serving EU clients.
Early movers such as UK-based exchange CoinJar, which has secured a MiCA license in Ireland by 2025, call it a necessary maturity that the regime will reward compliance with, but founders in markets such as Poland warn that thousands of virtual asset service providers (VASPs) could fall off the regulatory cliff when the deadlines are reached.
Companies face a hard freeze on the longest 18-month grandfathering window on July 1, with some national regimes already closed. For smaller companies and hybrid crypto projects, the same regime could prove disruptive.
Licensing, regulatory reform, and ongoing reporting costs are creating barriers to entry in Europe's crypto market, while MCA leaves narrowly defined fully decentralized services out of scope.
EU regulators say the rules are proportionate and designed to support innovation alongside strong investor protections, but it remains to be seen whether the MCA will end Europe as a trusted crypto hub or drive the next set of builders offshore.
MiCA hard reset for small organizations
Polish crypto exchange Ari10 received a MiCA license in the Netherlands in February. Founder Matthew Cara told Cointelegraph that, to his knowledge, out of nearly 2,000 VASPs in Poland, only his team has a MiCA license so far. A loophole he believes will force many local companies to close.
For Kara, MCA's cost and organizational requirements “leave no room for smaller players,” and the market will strengthen, a sentiment echoed by Matthew Pinnock, chief executive officer of Altura's decentralized finance platform.
He told Cointelegraph that such an environment favors large exchanges and custodians, mirroring patterns seen in countries like Japan, where strict post-2018 licensing will put smaller companies out of business.
Taran Dhillon, head of digital assets at decentralized impact investing platform Kula, made a similar point, telling Cointelegraph that “one-size-fits-all” licensing, governance and reporting requirements risk pushing early-stage teams and pilot projects to other hubs.
Related: Poland stands on crypto law, forcing local companies to go abroad
DeFi in the gray zone
In Recital 22, MCA's liberalization of fully decentralized services is one of the pressure points that protocols try to comply with without abandoning their design.
Pinnock Altura makes non-guard mechanisms that allow users to maintain control, but components like integrated safes and integrated front ends can still attract scrutiny. He expects many defy systems to be treated as hybrids, with factors such as improvisation and influencing outcomes determining their identity.
Related: ECB Papers Demands DeFi DAOs to Be Decentralized Outside of MiCA
To adapt, Altura is building a model where core functions remain on-chain, with regulated exchanges, custodians and wallets acting as access points for EU users. Dillon says that decentralization remains highly ambiguous, leaving most protocols in “regulatory limbo” without long-term uncertainty that could push responsible innovation to the beach.
Controllers and centralization debate
EU regulators insist the MCA is meant to balance innovation with investor protection, not drive out small firms. A spokesperson for the European Securities and Markets Authority (ESMA) told Cointelegraph that the framework supports innovation and fair competition, and the transition period is deliberately structured to give existing providers time to adapt. They emphasize that requirements are proportionate to the risk, and smaller companies are not required to meet the same bar as systemically important players.
ESMA fully supports the European Commission's push to regulate major cross-border exchanges at EU level, with a single regulator reducing forum shopping and streamlining supervision. Others, such as the Malta Financial Services Authority (MFSA), see that move as premature given MiCA's recent entry into force, and warn that local expertise is critical to effective regulation in smaller markets.
MiCA is a filter, not a threat.
While smaller founders see MiCA as a barrier to survival, early movers like CoinJar have framed it as a filter that strengthens the market. CEO Asher Tan told Cointelegraph that since the rules don't create an unlevel playing field, crypto is compatible with “rigorous financial frameworks.”
Tan sees Europe as a key growth market and says MCA will give him a transparent and passportable way to scale across the bloc. He says MCA is moving the industry away from speculative, poorly-understood cues to selective listings and long-term value — even if that accelerates consolidation and makes life difficult for new entrants with lighter capital.
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