Europe’s MiCA regime puts smaller crypto firms under pressure

Smaller crypto companies across Europe face mounting compliance costs as MiCA moves from framework to enforcement, raising fears of market consolidation.

The European Union’s Markets in Crypto Assets Regulation (MiCA) transition period is entering its final stretch, forcing smaller crypto firms across the EU to either secure authorization quickly or prepare to shut down regulated services. The transitional period ends across the bloc on July 1, after which any crypto asset service provider operating without a MiCA license must stop serving EU clients.

Early movers like United Kingdom-based exchange CoinJar, which said it secured MiCA authorization in Ireland in 2025, call the regime a necessary maturation that rewards compliance-first players, but founders in markets like Poland warn thousands of virtual asset service providers (VASPs) could fall off a regulatory cliff as deadlines hit.

Companies face a hard stop of July 1 for the longest 18-month grandfathering window, with some national regimes already closing. For smaller companies and hybrid crypto projects, the same regime may prove a breaking point.

The cost of authorization, governance upgrades and ongoing reporting is raising the barrier to entry just as MiCA leaves only narrowly defined, fully decentralized services outside its scope, setting up a likely wave of consolidation across Europe’s crypto market.

EU supervisors maintain the rules are proportionate and designed to support innovation alongside stronger investor protection, but whether MiCA cements Europe as a trusted crypto hub or drives the next generation of builders offshore remains to be seen.

Polish crypto exchange Ari10 secured a MiCA licence in the Netherlands in February. Founder Mateusz Kara told Cointelegraph that, to his knowledge, of the roughly 2,000 registered VASPs in Poland, only his group holds a MiCA licence so far; a gap he believes will force many local firms to close.

For Kara, MiCA’s cost and organizational requirements leave “no room for small players,” and the market will consolidate, a view echoed by Matthew Pinnock, chief operating officer at Altura decentralized finance platform.

He told Cointelegraph such an environment favors larger exchanges and custodians, mirroring patterns seen in countries like Japan, where stricter post-2018 licensing pushed smaller firms out of business.

Decentralized impact investment platform Kula’s head of digital assets, Taran Dhillon, made a similar point, telling Cointelegraph that “one-size-fits-all” authorization, governance and reporting requirements risk pushing early-stage teams and experimental projects to other hubs. 

Related: Poland stalls on crypto law, forcing local companies to move abroad

MiCA’s exemption for fully decentralized services in Recital 22 is one of the main pressure points for protocols trying to comply without abandoning their designs.

Pinnock said Altura runs non-custodial strategies where users retain control, but elements like unified vaults and coordinated front ends may still attract scrutiny. Many DeFi systems, he expects, will be treated as hybrids, with factors like upgradeability and whether there is an identifiable operator influencing outcomes determining their classification.

Related: ECB paper questions if DeFi DAOs are decentralized enough to sit outside MiCA

To adapt, Altura is building a model where core functions remain onchain while regulated exchanges, custodians and wallets act as access points for EU users. Dhillon, meanwhile, says the decentralization exemption remains too ambiguous, leaving most protocols in “regulatory limbo,” with prolonged uncertainty that could push responsible innovation offshore.

EU supervisors insist MiCA was designed to balance innovation with investor protection, not drive out smaller firms. A European Securities and Markets Authority (ESMA) spokesperson told Cointelegraph the framework supports innovation and fair competition, and the transitional period was deliberately structured to give existing providers time to adapt. Requirements are proportionate to risk, they stressed, with smaller firms not expected to meet the same bar as systemically important players.

ESMA fully backs the European Commission’s push to centralize supervision of major cross-border exchanges at the EU level, arguing a single supervisor would reduce forum shopping and streamline oversight. Others, such as Malta’s Financial Services Authority (MFSA), see that move as premature given how recently MiCA came into force, and warn that local knowledge remains crucial for proportionate supervision in smaller markets.

If smaller founders see MiCA as an existential hurdle, early movers like CoinJar frame it as a filter that will strengthen the market. CEO Asher Tan told Cointelegraph the rules do not create an unlevel playing field so much as bring crypto in line with “serious financial frameworks.”

Tan views Europe as a core growth market and says MiCA gives it a clear, passportable path to scale across the bloc. He claims MiCA is nudging the industry away from speculative, poorly understood tokens toward selective listings and long-term value — even if that accelerates consolidation and makes life harder for lightly capitalized newcomers.

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Source: CoinTelegraph