As the transitional period established by the Markets in Crypto-Assets (MiCA) regulation expires in Europe, the European cryptocurrency industry has entered a new stage of consolidation, with changes among existing Crypto-Asset Service Providers (CASPs) that have altered the landscape of the digital asset market.
A recent report by TRM Labs found that MiCA has facilitated the streamlining and consolidation of the European CASP ecosystem: only about one-fifth (281 out of 1,343) of crypto organizations that existed before MiCA came into force have applied for and received authorization to operate under the new rules.
The hardest hit were jurisdictions with less stringent registration requirements. None of the over 1,800 crypto organizations registered in Poland obtained MiCA authorization, and in Lithuania, only eight out of over 400 did.
TRM Labs notes that jurisdictions that started licensing early, such as Germany, have concentrated the vast majority of registered crypto companies. Germany's BaFin issued authorizations to 55 companies, while French and Dutch regulators issued 29 authorizations each.
Nevertheless, MiCA is fulfilling its purpose, as this system prevents high-risk companies from accessing European customers. TRM Labs ratings show that 12% of companies that remain unauthorized fall into the "High" or "Severe" risk category, while among authorized companies, this figure is 2%.
Exposure to sanctions-related risks is a distinguishing factor between these two groups: unlicensed companies transferred $5 billion to counterparties subject to sanctions, while licensed companies transferred only $1.7 billion, which is almost a third of that amount.
"While risk exposure overall appears similar for both groups, risk is more concentrated among deregistered companies. Half of them show no measurable illicit exposure, while a small number direct between 1% and 12% of their volume directly to illicit addresses. As a result, risk exposure for deregistered companies is approximately four times higher," the report concludes.
Nevertheless, MiCA has had a negative impact on Europeans' access to stablecoins, and cryptocurrency executives have expressed concern about the consequences of excluding high-market-cap stablecoins from the region.
However, the EU is now planning a full review of the MiCA framework aimed at addressing the stablecoin issue and including tokenized assets within its scope.
