The European market has always been among the most sought-after for companies around the globe, with crypto firms being no exception. The region offers a unique crypto business-friendly environment: a high concentration of the wealthiest countries by GDP per capita; a tech-savvy, young audience potentially more willing to invest in digital assets; and still a relatively low adoption rate.
With the introduction of Markets in Crypto Assets (MiCA) regulation – the EU’s forefront framework for digital assets, establishing clear compliance guidance for companies and greater user protection – Europe has become even more attractive for both investors and startups.
At first glance, the region created a perfect ecosystem for crypto firms, but is it really the case?
Fragmented Transition Period Across EU Member States
As per MiCA regulation, all European crypto asset service providers (CASPs) and virtual asset service providers (VASPs) must apply for a unified license across 27 member states. To ease the process, MiCA establishes a recommended transition, or “grandfathering,” period of up to 18 months while allowing member states to independently decide on the timeframe for the local licensee – 6, 12, or 18 months — if deemed appropriate.
During this transition period, cross-border rules remain highly fragmented and lack the harmonization promised. In fact, a license obtained in one jurisdiction currently does not guarantee rights for a crypto business to operate in the other 26 member states.
ESMA, one of the regulatory bodies overseeing MiCA implementation across the EU, outlined, “Cross-border activities by an entity benefiting from grandfathering may occur only if the entity complies with relevant legislation applicable in both the home and host Member States.”
Hence, European crypto firms continue facing dual compliance obligations: they must meet home-state grandfathering requirements as well as those of a targeted state. Cross-border recognition across EU27, as such, doesn't exist, as permission to offer services in any European country continues to rely on previously established local frameworks rather than harmonized EU crypto regulation.
Today, the status quo persists in Europe, with operators remaining subject to each jurisdiction’s regulatory regime as member states have not yet agreed on mutual recognition of grandfathered licenses.
Additional Rules Brought By MiCA
The lack of cross-border recognition is not the only challenge crypto firms face amid MiCA. Under the new regulation, companies both adapting to and entering the European market now face additional pressure.
While previously optional, the creation of a white paper is now mandatory for firms seeking to offer crypto-assets to the public or list such on an exchange. When it comes to certain cryptocurrencies, namely asset-referenced tokens (ARTs) and e-money tokens (EMTs), a whitepaper must receive prior approval from a competent regulatory body. Other digital assets may proceed with a simple notification alone.
In any scenario, a whitepaper must be published, made publicly available on the company’s website, and contain the following information necessary for potential investors' decision-making on purchasing the crypto asset(s):
Personal details about the issuer and, where relevant, trading platform operator;
Clear information about the crypto-asset project;
Clarification on whether the crypto-asset is being offered publicly or reserved for trading;
Overview of the essential features, such as the rights granted and obligations imposed;
Underlying technology overview;
Disclaimer about risks associated with the cryptocurrency;
Environmental, social, and governance (ESG) impact from the consensus mechanism used.
Beyond the whitepaper requirement, EU-based crypto businesses now fall under the updated marketing rules. All advertising must be precisely aligned with MiCA provisions, specifically:
Marketing campaigns should be clearly identified as such;
Information must not be misleading; all the risks involved must be clearly stated;
All disclosures shall remain consistent and mirror the information contained in the underlying whitepaper;
Every promotional material must indicate the fact of whitepaper public accessibility and provide the issuer's contact details, including phone number, email, and website address.
In addition to the two aforementioned, all crypto operators (CASPs) in Europe are mandated to comply with a broader set of requirements, including:
Adhere to AML/CTF standards by verifying customer identities, maintaining detailed records of the origin of customer funds, and monitoring transactions to detect, flag, and report suspicious activity as required under MiCA and broader AML directives;
Build robust mechanisms to safeguard customer data, uphold strict confidentiality, and mitigate cybersecurity risks;
Prioritize fairness, transparency, and strong customer rights protection;
Create accessible and effective channels for customer complaints and dispute resolution.
Lawyers Become Indispensable in Crypto Business Scaling
Ensuring full compliance when growing presence in Europe has become much harder than it was in the past, amid fragmented cross-border rules and mounting obligations on businesses. To avoid potential enforcement and reputational risks for unintentionally breaching MiCA or transition frameworks, many crypto operators are turning to seasoned legal counsel, such as Inteliumlaw.
With a strong track record in supporting businesses to establish in leading European hubs, law firms like Inteliumlaw now advise crypto firms both transitioning and scaling in the region to secure a MiCA license and commence compliant operations in the EU.
Although difficulties persist, operating in Europe remains possible for crypto firms relying on experienced legal professionals streamlining their market entry in full compliance with selected EU member state requirements during and after the grandfathering period.
