The transition period for the EU code for encrypted asset markets will end on 1 July. At that time, an encrypted asset service that had previously been registered under the old systems of Member States but had not yet acquired MiCA plates would lose the basis for continuing operations. EMSA ESMA has requested that unauthorized platforms be shut down in an orderly manner and that priority be given to safeguarding the interests of clients.

During the past year, MiCA was seen as the European unified regulatory framework for the encryption industry. Upon obtaining a MiCA licence issued by the regulatory authorities of the member States, the enterprise may operate throughout the EEA, covering the EU27 as well as Norway, Iceland and Liechtenstein. As the transition arrangements expire, the old VASP registration system will be largely out of the historical arena.

There is a significant discrepancy in the number of cards held

As of 2024, there were over 3000 virtual asset service providers registered in Europe, of which more than 1400 were registered in Poland alone. By contrast, as of this month, there were approximately 231 encrypted asset service providers authorized by the MiCA.

A large number of unconverted companies are expected to be forced out by many industry actors. OKX Europe CEO Erald Ghoos stated that many European encryption companies could not afford compliance costs, and some even asked about the possibility of M&As because the cost of independently completing licence plates and accompanying compliance requirements was too high.

  • Old VASP Register: over 3000
  • Current MICA Authorized Agencies: approximately 231
  • Transition deadline: 1 July

Compliance costs continue to rise

MiCA itself is not the only threshold. If an enterprise also wishes to deal with a stable currency or payment, it will often also need to pay an agency licence or an electronic money agency licence. According to industry sources, the truly expensive part is not the minimum capital but the application, legal, systematic and ongoing compliance costs.

According to Patrick Gruhn, founder of Perpetuals.com, the lock-in capital required for MiCA’s spot licence ranges from approximately €50,000 to €150,000, but the first year’s total licence and compliance costs can be as high as €700,000, and a streamlined team may require about €250,000 per year thereafter, with large exchanges likely to cost millions of euros.

He also mentioned that the cycle might take between 12 and 24 months from preparation until authorization was obtained and the first compliance transaction was initiated, and that legal fees could also reach the level of 100,000 euros. This means that even if small institutions are willing to transform, they may not have sufficient time and funding to complete the transition.

The Polish market is under pressure.

In some member countries, MiCA's landing rhythm is not consistent. It was mentioned that progress in establishing a complete encryption application and licensing mechanism was hampered in Poland by delays in local legislation and presidential vetoes.

According to the Chief Executive Officer of Morphic Financial Group, Mateusz Kara, there are currently some 2,000 VASP entities in Poland, but it is understood that very few institutions actually have a MiCA license. This means that, beginning in the second half of this year, a large number of local firms may have to shut down and European markets may become more concentrated in large institutions.

At the same time, the level of regulatory enforcement remains uncertain between countries. According to some legal sources, member States would not necessarily take the most severe measures immediately after that date; it was also judged that continuing to allow businesses to operate under the old law would conflict with EU rules.

Additional information:BitGo Europe has recently proposed an alternative to allowing small institutions to move their clients ' wallets into their supervised hosting system in order to reduce the pressure to apply for MiCA licence plates independently. In the company ' s view, the range of services available to European users would significantly shrink if, ultimately, fewer than 250 institutions were allowed to operate.