The European Markets in Crypto-Assets (MiCA) regulation was intended to be the world’s first comprehensive law governing digital assets, successfully establishing a unified regulatory framework for 27 EU nations. However, the implementation has proven to be less effective than anticipated. For many market participants, MiCA has turned into an insurmountable maze, with less than 8% of crypto companies operating in Europe obtaining the necessary licenses by the time the law took effect.
ForkLog investigated the reasons behind this regulatory "gold standard" devolving into bureaucratic chaos and how European authorities are attempting to address the situation.
Preparation for Implementation
The MiCA regulation was rolled out in phases over nearly three years to allow businesses time to adapt. This lengthy preparation period may have contributed to the challenges faced. In the spring of 2023, the European Parliament and subsequently the EU Council approved the document. MiCA officially came into effect on June 29, 2023, as Regulation 2023/1114.
Rules governing stablecoins began on June 30, 2024, as regulators aimed to first test mechanisms in this relatively simpler segment. The main regulations, including those for crypto asset service providers (CASP), came into effect on December 30, 2024, marking the point when companies were required to start submitting licensing applications.
Theoretically, the law allowed regulators 25 working days to review applications, with an additional 40 days in special cases, totaling about three months. In reality, the review periods stretched to nearly 10-12 months. Existing crypto companies in Europe could take advantage of a transitional period until July 1, 2026, but each country individually decided whether to implement this and for how long.
This led to varying deadlines across EU nations. Countries like the Czech Republic, Estonia, France, Luxembourg, and Malta opted for the full 18 months, while Germany set 12 months, the Netherlands six, and Lithuania just five. Instead of a unified market, this resulted in 27 fragmented jurisdictions.
By early 2026, national financial regulators across Europe were overwhelmed with licensing applications. According to ESMA, by May only about 17% of the companies operating prior to MiCA’s implementation had obtained CASP authorization. By the end of June, the ESMA registry listed just under 250 active licenses (which grew to 313 by July 24). As of July 1, all unregistered firms were required to cease operations.
Before MiCA, over 3,000 crypto companies operated in Europe, meaning roughly 90% of the market is currently “illegal.” Regional statistics further illustrate the issues; five countries—Greece, Hungary, Poland, Portugal, and Romania—have issued no licenses at all. Germany emerged as the licensing leader, processing 23% of total applications, followed by France, the Netherlands, Malta, and Cyprus.
Examples of Chaos
The challenges of implementing MiCA are not limited to overloaded regulators and delayed licensing. In some countries, the situation has escalated to the point of jeopardizing local crypto companies.
A notable case is Poland, where a political crisis has effectively stalled the launch of a national licensing system.
The Polish Crisis
Poland stands out as the only EU nation that had not initiated its internal licensing mechanism by July 1. Approximately 2,000 virtual asset service providers are registered in the country, yet none can secure permission from local regulators.
The delay stems from a prolonged political conflict. President Karol Nawrocki has vetoed the MiCA implementation law three times—once in December 2025, again in February 2026, and finally on June 11, just three weeks before the end of the transitional period. In each instance, the Sejm lacked enough votes to override the veto.
Nawrocki believes the proposed law grants the Financial Supervisory Commission “excessive powers,” including the ability to freeze customer accounts and block websites without a court ruling. Consequently, a competent regulatory authority has yet to be appointed.
Karol Nawrocki. Source: Reuters."I support the regulation of the crypto market. I support consumer protection, but it must be done effectively. The bill will be signed and come into force if amendments are made," Nawrocki commented on his latest veto.
Nawrocki has also pointed out that MiCA favors “loyal banks and large corporations” while hindering startups. Ironically, it is precisely these smaller Polish projects that struggle with licensing.
This predicament forces companies to seek licenses in neighboring countries like Lithuania, Latvia, or Germany. They can return to Poland afterward, but this incurs additional relocation costs for businesses and results in lost tax revenue for the state.
Local entrepreneurs warn that the political deadlock and high compliance costs could drive most local crypto startups out of business.
"Business is simply relocating elsewhere. None of the Polish companies can obtain a permit," stated Wojciech Kaszycki, a strategic advisor for the Warsaw fintech project BTCS.
Major Exchange on the Sidelines
While Poland's situation is largely a political crisis, Binance's case represents a bureaucratic nightmare that neither its size nor resources could mitigate.
The world’s largest cryptocurrency exchange by trading volume applied for a license in Greece in January 2026. In April, the local regulator HCMC confirmed that the application was complete, and the company expected approval by early June. However, relevant meetings were repeatedly postponed.
On June 16, Reuters reported that HCMC planned to reject the application. Binance denied this claim, asserting that the agency had completed its review and deemed the submitted documents compliant with MiCA requirements.
One week before the deadline, on June 24, Binance withdrew its application. The request was neither approved nor rejected.
"Europe remains one of Binance's key markets. We are still committed to operating within the transparent, fair, and uniform MiCA regulation. Our plans for growth in the region remain unchanged, and we are confident we can obtain a license in the coming months," Binance representatives stated.
What caused the delay? According to The Wall Street Journal, ESMA privately recommended national regulators reject Binance's applications due to compliance issues related to anti-money laundering regulations. Regulators in Greece, Ireland, and Latvia coordinated their review of the company's documents, wary of its past legal troubles and opaque corporate structure.
Binance's European head, Gillian Lynch, refuted these claims, describing the WSJ article as "distorting facts."
Nonetheless, starting July 1, the exchange limited registration and service provision to users from EU countries.
Binance CEO Richard Teng noted that around 70% of European users transferred their funds to custodial wallets after the restrictions were imposed. He also cautioned:
"If the implementation of [MiCA] becomes fragmented, unpredictable, or inconsistent, Europe risks losing users, companies, investments, jobs, and tax revenues to other regions."
Goodbye to Tether
The world’s largest stablecoin, USDT, also completely lost access to regulated exchanges in the EU on July 1, as Tether chose not to apply for a MiCA license.
The reason lies in the law's requirement to maintain at least 60% of reserves in deposits at European banks. Tether's backing is primarily in U.S. Treasury bonds, making compliance with this regulation incompatible with its financial model.
Tether CEO Paolo Ardoino warned that placing such large amounts in EU banks could jeopardize USDT in the event of a sudden surge in redemption requests.
By the deadline, leading exchanges gradually removed USDT, including European branches of Coinbase, Binance, OKX, and Kraken.
Users can still store USDT in personal wallets and trade it on decentralized exchanges, as the restriction applies only to licensed platforms. Tether remains active in the European market through partnerships, with StablR and Oobit launching MiCA-compliant stablecoins EURR and USDR on Tether's Hadron tokenization platform.
The primary beneficiary in this scenario has been Circle, with its USDC and EURC stablecoins. Circle obtained a license in France, applicable across all 27 EU countries, positioning USDC and EURC as the main stablecoins on European platforms.
Working to Fix Issues
The situations outlined highlight the failures of MiCA on three distinct levels. Polish startups are unable to secure licenses due to political disagreements, while Tether has voluntarily exited the European market, deeming the regulation too risky for its business model.
Nonetheless, it would be incorrect to assume that regulators are unaware of these problems. On May 20, prior to the full enforcement of the rules, ESMA launched public consultations to review MiCA.
Originally scheduled to conclude by August 31, the timeline was extended to September 30. The discussions are divided into 86 questions across four thematic blocks: the scope of digital assets, stablecoins, service providers, and sustainability.
The Commission is directly asking whether it is possible to "simplify, shorten, or even eliminate" the administrative barriers created by the new regime. This process has already been dubbed MiCA 2.0 within the industry, with the primary goal of addressing issues related to “stablecoins” not denominated in euros. Currently, the law does not regulate companies outside the EU that issue such assets and serve European users.
At the same time, ESMA is intensifying oversight. In July, the agency launched its first coordinated review of custodial risks—a Common Supervisory Action. Regulatory bodies are examining how market participants manage operational risks when storing cryptocurrencies. This oversight campaign will continue until the first half of 2027.
Moreover, Brussels is discussing a broader reform of MiCA. According to sources familiar with internal discussions, the European Commission is considering transferring the oversight of CASPs from national authorities directly to ESMA. Academic criticism labels this move as "legally questionable, structurally unsound, and operationally harmful," but the mere fact that this discussion is underway indicates that officials in Brussels recognize the current framework is ineffective.
Thus, the EU authorities are currently engaged in three key actions: gathering feedback from businesses, tightening oversight of already licensed platforms, and preparing a new package of amendments aimed at closing existing "gaps" in the regulation.
***
The rollout of regulation is a gradual process, so immediate results should not be expected. Moreover, MiCA is indeed the first comprehensive document of its kind, encompassing new areas of the financial sector. However, the evident issues within the regime, including excessive fragmentation and inconsistency, cannot be overlooked. Revising MiCA presents an opportunity to correct mistakes, but regulators must acknowledge that they made several erroneous decisions. The contentious launch has cost the market valuable time and undermined investor confidence, making it crucial that the new implementation avoids repeating previous missteps.