MiCA Purges 80% of European Crypto Firms Amid Consolidation

The European crypto industry has undergone significant changes since the Markets in Crypto Assets (MiCA) regulation came into effect, leading to a consolidation of existing crypto asset service providers (CASPs). A recent report by TRM Labs found that only about one-fifth of pre-MiCA crypto organizations applied and received authorization to operate under the new rules. This means that approximately 80% of European crypto firms were purged from the market.

The jurisdictions with looser registration requirements were hit the hardest, with none of the over 1,800 crypto organizations registered in Poland receiving MiCA authorization, and only eight out of over 400 being authorized in Lithuania. In contrast, Germany's BaFin authorized 55 firms, while French and Dutch regulators licensed 29 companies each.

TRM Labs' report also found that exposure to sanctions risks is a key differentiator between authorized and unauthorized firms. While both groups sent significant amounts of funds to sanctioned counterparties, the offboarding firms (those not authorized) showed roughly four times higher exposure. Furthermore, nearly half of these offboarding firms had no measurable illicit exposure, while a small number routed 1% to 12% of their volume directly to illicit addresses.

The MiCA regulation has had a negative impact on European access to stablecoins, with crypto executives raising concerns about the consequences of leaving large market capitalization stablecoins out of the region. The EU is currently planning a full revision of the MiCA framework focused on solving the stablecoin issue and bringing tokenized assets under its scope.