Despite the fact that there’s little argument against the need for regulation of the cryptocurrency sector, there was always going to be kickback when it eventually happened. In June 2023, the European Union took the initiative and launched the Markets in Crypto-Assets (MiCA) regulation, becoming the first territory in the world to introduce compliance into the sector. Scrutiny and criticism inevitably followed. It’s still relatively early days, but with some doubt over the future health of the EU’s crypto space, there may be room for the UK to enhance its own crypto standing.
Understanding the problems with MiCA
MiCA is not yet two years old. In fact, thanks to the phased introduction, parts of the regulation only came into play in December 2024, so no one is really in a position to fully gauge its effects. However, criticism has been loud and varied, with the most frequent complaints focusing upon five key areas.
The problems began with the late release of MiCA’s regulatory technical standards (RTS). Published more than 18 months after the bill’s introduction, the delay caused significant uncertainty and confusion within the sector, and has since given rise to the argument that earlier release may have enabled the correction of many of the other concerns before they were actually implemented.
The most pressing of such concerns is the fact that MiCA does not cover the regulation of stablecoins. And this is an impressive oversight, given that stablecoins are known to be one of the most volatile crypto assets, and when unstable, they could potentially cause serious damage to both the crypto markets and the wider financial system. Without the regulation of stablecoins, MiCA can only be inadequate at best and totally ineffectual at worst.
And this narrowness of focus has also raised concerns regarding MiCA’s ability to futureproof against developmental threats. Because the crypto industry has always been characterised by innovation, there is little doubt that the space will continue to evolve. And as things stand, MiCA has put few precautions in place to guard against loopholes or prevent fraudulent behaviour from inventive bad actors.
Despite this apparent laxity in some areas, there remains anxiety surrounding MiCA’s impact on industry development. During its 15-year history, the crypto space has spawned some of the most innovative and game-changing technological developments, from blockchain to tokenised assets, and decentralised finance. All of which have been developed by entrepreneurs entering the space. But the stringency of MiCA is making it near to impossible for smaller crypto companies and startups to enter or stay within the market. If there is no space for innovation within the EU’s crypto sector, it can only stagnate, which could have damning repercussions for both the crypto industry and the wider financial ecosystem.
Lastly, there’s the worry about the cost of MiCA and who is going to foot the bill. New regulation always means new expense, and few crypto companies can afford to simply swallow the additional costs. This means that ultimately, they will be passed on to consumers, which is likely to deter both new and existing investors.
Together, these things could spell disaster for the EU’s crypto space – while opening opportunity for other territories – including the UK.
How could MiCA benefit the UK?
In some respects, MiCA is already benefitting the UK. Faced with new – and for sometime, uncertain – regulations, many of the EU’s crypto investors have been looking for alternative places to take their money. And despite the fact that the UK has always maintained a minimal presence in the cryptocurrency space – there are only around 40 registered crypto businesses in the UK, compared to more than 2,000 in the EU, and 4,852 in America – as the EU’s nearest neighbour, many of them are coming here. That’s something that all UK crypto businesses should be taking advantage of. My business is based in the UK and the Netherlands, but because we will have the ability to passport the license in other EU member states once we have gained the MiCA license, we’ll be able to attract customers from other territories. Other UK crypto businesses will be able to do the same. And with the instability in America and other parts of the world right now, the UK is looking like a very safe pair of hands. However, it will only be possible for the UK to maintain and grow that status if it takes care when initiating its own set of crypto regulations.
The UK’s Financial Conduct Authority (FCA) is already in the process of developing a comprehensive regulatory framework for cryptoassets. The aim is to begin implementation at some point in 2026. The FCA needs to learn from the mistakes of MiCA. Clarity needs to come first and foremost. Stablecoins need to be part of the regulation. And there needs to be flexibility, both to allow – ideally to foster – innovation and to prevent loopholes forming when that innovation happens.
If the UK can take what MiCA has done and make it better, make it more fit for purpose, it could create a regulatory model that becomes the world standard. Supporting crypto businesses while protecting the investors who trust them with their money. Bringing both new business and prestige to the UK in the process.
Regulation of the cryptocurrency space is essential to combat fraud and deception. Very few people would disagree with that statement. But for it to work without smothering its potential, it has to be done properly. MiCA is a good first start. The EU should be applauded for being brave enough to take the first steps. But first isn’t always best. And MiCA’s flaws open a massive window of potential for the UK.
Peter Curk is the CEO of ICONOMI, a leading platform in digital asset management. With a background in finance and blockchain, Peter is passionate about making crypto investing accessible and easy for everyone. Under his leadership, ICONOMI has grown into a trusted name in the industry, offering innovative solutions for individuals and institutions alike.
