TRM Labs’ latest report highlights the effects of the full implementation of MiCA on Europe, tightening the existing regulatory patchwork. Only a fifth of all pre-MiCA crypto service providers received an authorization to operate, with the largest number coming from jurisdictions that built licensing capacity early.
Key Takeaways
MiCA consolidated the EU crypto market, with only about 20% of existing firms receiving authorization.The rules successfully isolated high-risk companies, reducing European exposure to sanctioned entities.The EU plans a full revision of the MiCA framework to address its negative impacts on stablecoin access.As the grandfathering period established by the Markets in Crypto Assets (MiCA) regulation ended in Europe, the European crypto industry entered a new period of consolidation, as the existing crypto asset service providers (CASPs) landscape experienced changes that shifted the digital assets landscape.
Jurisdictions with looser registration requirements were hit the most. None of the over 1,800 crypto organizations registered in Poland received MiCA authorization, and only eight out of over 400 were authorized in Lithuania.
TRM Labs points out that jurisdictions that embarked on licensing early, such as Germany, concentrated the vast majority of registered crypto firms. Germany’s BaFin authorized 55 firms, while French and Dutch regulators licensed 29 companies each.
Nonetheless, MiCA is doing what it is supposed to do, as the framework isolated high-risk companies from reaching European customers. TRM Labs’ ratings indicate that 12% of the firms left unauthorized carry a High or Severe risk classification compared to 2% from the authorized firms group.
Exposure to sanctions risks is the differentiating factor between the two groups, as unauthorized firms sent $5 billion to sanctioned counterparties, while authorized ones sent just $1.7 billion, almost a third.
“Although exposure appears broadly similar across the two groups, the risk is more concentrated among offboarding firms. Half show no measurable illicit exposure, while a small number route 1% to 12% of their volume directly to illicit addresses. As a result, exposure is roughly four times higher for offboarding firms,” the report concluded.
