MiCA two years on: the transitional regime created blind spots

Demonstration op-ed. The author, the law firm and the situations described are fictional.

The European regulation on markets in crypto-assets was meant to put an end to the patchwork of national regimes. On paper, it succeeded: a single licence valid across the Union, common requirements on capital, governance and client protection. In practice, the transitional period produced a situation few market participants had anticipated.

Diverging national timetables

The text allowed Member States to give providers that were already registered extra time to obtain their licence. Some countries chose the maximum period, others a very short one, and others none at all. During this period, the same European client could be offered services by fully licensed firms and by others still operating under a simple national registration, with nothing in the interface or marketing to tell them apart.

The passport before the licence

The most serious difficulty lies with passporting. A provider licensed in a country with a fast timetable could serve the entire European market, including countries where its local competitors were still waiting for their own decision. In the files we follow, several clients chose where to apply not on the basis of where they actually operate, but on the expected speed of review.

None of this is unlawful. But it shifted competition from products to procedures, and gave a lasting advantage to those with the legal resources to arbitrate between authorities.

What should be fixed

Two simple measures would reduce these blind spots. First, a European register updated in real time and open to clients, showing each provider’s exact status and the countries where it is authorised to operate. Second, harmonised review times or, failing that, their publication, so that choosing a jurisdiction is no longer a bet on an authority’s workload.

The transitional period is coming to an end. Its effects will last: market positions gained over these two years will not redistribute themselves.