Europe has never been known for precipitate innovation. It takes a cautious path, prioritising regulation over disruption while other nations rush in. So, it’s not enormously surprising that the European Union was the world’s first territory to attempt regulation of the cryptocurrency space.
With the launch of the Markets in Crypto-Assets (MiCA) regulation, the EU hasn’t just stayed true to its regulatory form, it’s taken a decisive global lead, setting a precedent for others to follow.
The move wasn’t without controversy, but while addressing the flaws that have become ingrained into the crypto space, MiCA also positions Europe as a potential leader in an arena that’s always lacked clarity.
But there’s more to do if the EU wants to turn its first steps into a position of long-term influence.
How MiCA could shape the EU’s role in the future of cryptocurrency
For years, cryptocurrency was beyond regulation. Not just too decentralised, too novel, and too far removed from traditional legal systems to fit within existing rules, but too unwilling to even try to comply. It was its own thing, an alternative to established finance. As such, most governments took a hands-off approach, letting the industry evolve on its own.
The result has been the development of a chaotic and uncertain environment, off-putting for businesses and consumers alike. But as crypto adoption grows and its integration into mainstream finance becomes inevitable, the need for clear regulation has become urgent.
MiCA recognises this, placing the EU in the unusual position of outpacing other territories. While the United States still leans on litigation and enforcement and the UK is slowly shaping its own framework, the EU has offered a single, unified regulatory structure across its 27 member states for more than a year, delivering a rare sense of consistency and clarity in a landscape that has been anything but.
Nevertheless, MiCA can only be just the beginning. While it sets clear standards for stablecoins and crypto-asset service providers, covering licensing, transparency, and operational requirements, it can’t be denied that it leaves significant gaps. Key areas, including decentralised finance (DeFi), non-fungible tokens (NFTs), and staking remain outside its current scope.
These gaps can’t be allowed to stay unaddressed if the EU wants to maintain its advantage and genuinely lead the field.
Should the EU be looking to a MiCA 2.0?
MiCA was never meant to be the final word on crypto regulation. Nor should it be. Its true value lies in what the EU does next.
If the EU can build on MiCA’s foundations, by developing a more adaptive, future-ready framework capable of evolving alongside the crypto landscape, it could dictate the future of crypto regulation globally. What’s called for is a MiCA 2.0, that holds the capacity to become a scalable, comprehensive rulebook, fit for a single market of over 400 million people.
Such a framework wouldn’t just offer regulatory clarity, but hold the potential to transform the EU into the world’s most attractive hub for crypto firms, while strengthening investor protection and trust. In doing so, Europe could once again position itself as a global standard-setter, just as it did with GDPR.
Despite early scepticism, GDPR became the blueprint for data privacy laws around the world, from Switzerland to South Korea. It proved that the EU can lead on regulation with global influence. Now, with MiCA, it has the chance to do the same for digital assets.
What should the EU do next?
The next obvious step for the EU is to further MiCA’s remit by closing the gaps left by its current iteration. That means tackling the most difficult to regulate areas, including DeFi, staking, and NFTs. While they were once considered niche, they’re now central to the digital asset ecosystem, so ignoring them is no longer an option.
Equally important is ensuring consistent enforcement of all current and future MiCA regulations. Without uniform application across all 27 member states, MiCA risks becoming fragmented and losing its credibility, just as other EU regulations have in the past. A robust, cross-border supervisory framework is critical, and it must be implemented swiftly if MiCA is to reach its full potential.
Staying ahead in a shifting regulatory landscape
MiCA has given the EU a head start in crypto regulation, but that lead won’t last by itself. The UK, though smaller and still developing its regulatory framework, is nimble, forward-thinking, and well-positioned to capitalise on any EU errors or oversights. And while the US seems enmeshed in its own insular problems, when it does make a move, it has the financial power and global influence to make an immediate impact.
So, this is no time for the EU to lose momentum. To maintain its position as a global standard-setter, policymakers must remain confident and act fast. With the right choices, the EU still has the opportunity to shape how crypto assets are integrated into the future of global finance, but it can’t afford to hesitate.
Like GDPR, MiCA has shown the world what the EU can do. It’s brought clarity and structure, to what was once viewed as the lawless Wild West of finance, providing direction where it has been notable by its absence.
But there is no time for complacency. MiCA is currently too narrow and too slow. It’s not equipped to keep pace with the rapid innovation of the sector, which opens it up to future loopholes and inefficiencies, risking its future viability. So, if the EU truly wants to safeguard investors, and foster trust through transparency and consistency, now is the time to do more. It has the tools, the influence, and the momentum. The only question is whether it will seize the opportunity.
