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What is MiCA? Understanding the EU’s legislative framework for digital assets

Published on 06/10/2025
3 min read
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Protect your digital assets with CoinCover

The European Union created the world's first comprehensive regulatory framework for digital assets when it proposed the Markets in Crypto-Assets Regulation (MiCA, also known as MiCAR) in September 2020.

MiCA established harmonised rules for cryptoasset issuers, service providers, and trading platforms throughout the EU, providing a single regulatory framework that has since influenced policy development worldwide.

MiCA became fully operational in December 2024 and was part of a broader digital finance package designed to accelerate European innovation, protect European citizens, and ensure the financial stability of the bloc’s 27 member states. This article will explain MiCA’s practical implications, its compliance requirements, and the opportunities it creates for forward-thinking companies in and outside the crypto industry.

Who and what does MiCA cover?

MiCA casts a wide net across the crypto ecosystem. It applies to cryptoasset service providers (CASPs), issuers, offerors, trading platform operators, and anyone wanting to trade within or serve cryptoassets to the EU market. 

MiCA takes a risk-based approach. It distinguishes between three primary categories of cryptoassets, with each facing different regulatory requirements based on the risks they pose to European citizens and the financial stability of their respective countries:

  • Asset-referenced tokens (ARTs) aim to stabilise their value by referencing multiple assets, including one or more official currencies. These face the strictest regulatory requirements due to their potential widespread adoption and systemic risk implications. Pax Gold (PAXG) is an example of an ART.

  • E-money tokens (EMTs) are designed to maintain a stable value by pegging to a single official currency (like the US dollar or euro). Following MiCA, these must be issued by authorised credit institutions or electronic money institutions. This category includes popular stablecoins like USDC, USDT, and EURS.

  • Other cryptoassets encompass everything else, including utility tokens that provide access to goods or services, and are subject to disclosure and transparency requirements. The Basic Attention Token (BAT) is an example of a token that would fall under this category, because it provides access to specific services within the Brave browser ecosystem.

While MiCA covers much of crypto, it does not cover everything. The regulation excludes non-fungible tokens (NFTs), decentralised autonomous organisations (DAOs) with no identifiable operators, and central bank digital currencies (CBDCs) issued by monetary authorities. MiCA also doesn’t cover anything already regulated by existing financial services legislation.

What are the benefits of MiCA?

MiCA delivers substantial advantages for the European crypto landscape. One, it protects European citizens from unclear risks and poor disclosure practices through mandatory cryptoasset whitepapers that provide clear, standardised disclosures about risks, functionality, and issuer details.

Two, it improves market stability because issuers must now maintain adequate reserves and implement robust custody arrangements. This significantly reduces the risks of stablecoins or exchanges imploding, as has happened in the past with LUNA and FTX.

Three, MiCA creates a level playing field across the EU. Because of MiCA’s passporting rights, authorisation in one EU member state allows CASPs and issuers to operate across all other member states. This significantly simplifies regulatory compliance for businesses operating within the EU.

What are MiCA’s compliance requirements?

MiCA establishes clear operational requirements for crypto businesses. CASPs and issuers must obtain authorisation from designated national regulators and meet specific standards, including:

  • Governance and risk management: robust internal controls and resilience frameworks.
  • AML/KYC procedures: tighter due diligence and transaction monitoring requirements.
  • Custody standards: secure client asset protection with liability provisions and recovery solutions.
  • Capital requirements: adequate funds proportionate to business activities.
  • Record keeping: comprehensive documentation of all services, orders, and transactions.
  • Ongoing reporting: detailed transaction monitoring, particularly for significant tokens.

In order to comply with these requirements, CASPS and issuers wanting to operate in the EU will likely have to establish new compliance systems, hire new employees, and potentially change aspects of their business models.

Non-compliance can result in fines, enforcement actions, and exclusion from EU markets. It can also damage your business reputation and limit your access to banking services and institutional partnerships. Now that MiCA is in full effect, compliance is a legal requirement for operating within Europe's crypto market.

What opportunities does MiCA unlock?

Despite these MiCA compliance requirements, the regulation opens significant doors for blockchain companies. It offers access to the EU’s 27 member states and a projected 268.15 million investors through a single regulatory framework, eliminating the complexity of navigating multiple national licensing regimes.

Blockchain companies are already positioning themselves appropriately. Circle partnered with Bison Digital Assets in early 2024 to provide MiCA-compliant USDC and EURC stablecoins to European customers, while Coinbase secured its MiCA license in Luxembourg to establish its European crypto hub.

But it’s not just blockchain companies. Traditional finance stands to benefit from MiCA too. Financial institutions previously hesitant to engage with crypto due to regulatory uncertainty can now participate with clear rules and oversight, potentially unlocking billions in institutional capital. One such example is Société Générale, which became the first major bank to list a MiCA-compliant stablecoin on an exchange in December 2023. 

Additionally, MiCA's rigorous security standards help build client confidence and trust. MiCA-compliant companies can demonstrate robust custody arrangements, proper segregation of client assets, and comprehensive risk management. This increasingly matters to institutional clients and security-conscious retail investors.

Conclusion

MiCA is a step towards greater crypto adoption in Europe. While it imposes compliance requirements on industry participants, it also delivers the regulatory clarity necessary for widespread institutional and retail adoption.

Given that trust and compliance are important variables for success in the industry, crypto businesses that demonstrate robust regulatory adherence through MiCA have a much better chance of attracting both institutional clients and retail investment. Speak to CoinCover to learn how you can improve your digital asset security and help your business thrive under MiCA.

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