European cryptocurrency regulation has entered its decisive phase. However, even obtaining a license under MiCA rules may not guarantee that a cryptocurrency company has its future in the European Union secured. According to Gate Europe CEO Giovanni Cunti, some licensed firms may find that in the long term they cannot finance the demanding operations and fulfillment of regulatory obligations.
The European cryptocurrency market is changing significantly after the end of the MiCA regulation transition period. While the number of companies that can legally offer regulated cryptocurrency services to customers in the European Union is gradually increasing, at the same time pressure is growing on their finances, personnel capacity, and internal processes.
Chief Executive Officer of Gate Europe Giovanni Cunti in Cointelegraph’s Chain Reaction show warned that some companies may leave the European market even though they have already obtained a MiCA license.
“I think there will be quite a few more companies that will get a MiCA license but won’t be able to sustain the costs and resources needed to operate this business long-term,” Cunti said.
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What is MiCA and why is it important for crypto firms
MiCA, fully named Markets in Crypto-Assets Regulation, represents a unified European regulatory framework for cryptocurrencies and related services. Its goal is to establish common rules for the entire European Union market, increase investor protection, and limit cases where cryptocurrency companies operate without sufficient oversight.
The eighteen-month transition period ended on July 1st. Cryptocurrency companies providing regulated services to customers in the European Union have needed appropriate authorization since that date, or must otherwise limit or completely cease their operations.
The approaching deadline forced several cryptocurrency exchanges to withdraw certain services from European countries or limit their availability. Companies that obtained licenses, conversely, began operating under the new pan-European regime.
Even Binance, which is the world’s largest cryptocurrency exchange by trading volume, failed to obtain authorization before the July deadline. Binance’s case showed that meeting European rules may not be a given even for the largest global players.
Costs don’t end with obtaining a license
A MiCA license is not merely a one-time administrative step. Cryptocurrency companies must fulfill long-term requirements concerning risk management, protection of client funds, capital adequacy, transparency, or anti-money laundering controls.
It is precisely these ongoing costs that, according to Cunti, may pose a problem especially for smaller firms and start-up projects. While they may pass through the initial licensing process, they subsequently discover that operating in compliance with regulation requires more employees, legal services, and technological investments than they can afford.
Stricter rules simultaneously raise the barrier for new companies that want to enter the European cryptocurrency market. For a start-up project, it may be easier to launch services in a country with milder requirements than to go through a costly European licensing process.
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Some innovative projects may head elsewhere
Cunti acknowledged that MiCA brings stronger protection to investors. At the same time, however, he fears that the European environment may provide less room for innovation than jurisdictions with looser rules.
Some cryptocurrency startups and significant technology projects might therefore give preference to other parts of the world.
“We may have to prepare for some projects, or even some important projects, looking for other jurisdictions with different rules,” Cunti said.
The European Union is thus trying to find a balance between consumer protection and maintaining a competitive environment. Too mild regulation can increase the risk of fraud, misuse of client funds, or collapse of unvetted companies. Too costly rules, however, may push some innovation and investment beyond Europe’s borders.
Number of licensed companies continues to grow
Despite concerns, the number of companies authorized to operate under MiCA continues to rise, albeit at a slower pace than immediately after the end of the transition period.
The European Securities and Markets Authority, known by the acronym ESMA, on Friday added another 14 crypto-asset service providers to its register. This brought the total number of authorized companies to 294.
In the first update of the register after the end of the transition period on July 1st, ESMA added 37 firms. The more recent addition thus suggests that the licensing process continues, but the number of newly approved companies is gradually decreasing.
Crypto-asset service providers are designated by the acronym CASP in European legislation. They include, for example, cryptocurrency exchanges, trading platforms, digital asset managers, or companies providing cryptocurrency transfers.
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Less competition may help firms that remain
Stricter regulation need not mean only complications for all companies. Limiting the number of providers may simultaneously create greater business opportunity for firms that can fulfill MiCA requirements in the long term.
“There was a market with thousands of operators, and now there is a market with only hundreds,” Cunti described the change in the European environment.
Licensed companies may also benefit from customer migration. People whose original exchange or cryptocurrency service has left the European market are looking for another provider where they can continue to trade or store their digital assets.
“It’s definitely a big opportunity for all of us. There is migration happening because customers don’t want to lose access to this market,” added the Gate Europe CEO.
European crypto market enters period of consolidation
MiCA regulation was meant to end the fragmentation of the European cryptocurrency market and replace different national rules with a unified system. However, the first weeks after the end of the transition period show that obtaining the license itself is only the beginning.
What will be decisive is whether firms can also finance the costs of compliance in the coming years. The European market is therefore likely facing a period of consolidation, during which weaker or less capitalized companies will leave, merge with larger competitors, or relocate their activities outside the European Union.
For the average customer, the result could be a clearer and safer market with a smaller number of vetted providers. At the same time, however, there is a risk that lower competition will limit the range of services, slow innovation, or increase fees. The real impact of MiCA will therefore not be shown merely by the number of licenses issued, but primarily by how many companies can survive long-term under the new regime.
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