In 2019, France made a bet that few countries still dared to make: regulate crypto-assets without stifling their development.
With the PACTE law and the creation of the status of digital asset service provider (PSAN), it attempted something rare in the history of financial innovations: regulating a nascent sector while allowing it the possibility of existing.
This choice allowed the emergence of a real ecosystem. Entrepreneurs have launched, investors have taken an interest in the market and several international platforms have chosen France as a gateway to Europe. For a few years, the country was even considered the “El Dorado” of the crypto world.
Six years later, Europe enters the era of Micathe first comprehensive regulation of crypto-assets on a continent-wide scale. On paper, the text constitutes a major step forward: it provides clarity, harmonizes the rules and imposes high standards in terms of governance, customer protection and risk management. However, behind this ambition lies a more uncomfortable question: wanting to secure the ecosystem crypto European, is Europe making it impossible?
Regulation that transforms the industry
MiCA meets a real need. For a long time, regulatory uncertainty has slowed the development of the sector. Businesses were hesitant to invest, financial institutions remained cautious and users operated in an environment that was sometimes difficult to understand. From this point of view, this regulation constitutes progress. For the first time, stakeholders have a harmonized legal framework at European level. The requirements are clear and relate to strengthened governance, risk management systems, protection of client assets, cybersecurity, as well as operational transparency.
Furthermore, MiCA also opens the way to strengthened collaboration with institutions. The regulation reassures banks, insurers and investment funds which are now considering integrating crypto-assets into their portfolios or services. This openness creates a bridge between traditional financial players and the crypto ecosystem, promoting both innovation and market legitimacy.
For crypto platforms, this implies a profound transformation. It is not simply a question of obtaining administrative authorization, but of rethinking its services and its entire internal organization. It is then necessary to strengthen compliance teams, structure control functions, and implement reporting processes comparable to those in the banking sector.
For certain players, these developments represent considerable investments, both in human resources and in legal structuring, in order to meet these new requirements with a direct consequence: a considerable increase in costs and market entry times. And this is precisely where the future of the European ecosystem is at stake.
An ecosystem that could disappear under the weight of its own regulation
MiCA was designed to structure the market. But in practice, its requirements are such that they could drastically reduce the number of actors capable of meeting them. In France, more than a hundred companies have obtained or requested PSAN registration. Tomorrow, only a fraction of them will be able to meet the full requirements of this regulation. Compliance costs, administrative delays and process complexity risk creating an extremely high barrier to entry. This phenomenon could unfortunately lead to a rapid concentration of the market around a few large platforms with the necessary resources to absorb these constraints.
Most European start-ups risk disappearing or setting up abroad where compliance requirements are much less onerous (the United States, for example). At the same time, international competition is increasing. In the United States, despite a sometimes uncertain framework, the approach remains fundamentally oriented towards economic development. They chose to set guardrails, while allowing innovation to move forward. In other regions of the world, some jurisdictions have understood that crypto is also a battle of economic attractiveness.
As for Europe, it made a different choice: to prioritize security above all else. This caution is understandable and laudable. However, if taken to the extreme, it can produce the opposite effect to that sought.
Because to protect users, we still need to be able to regulate the platforms on which they are located. In a global digital marketplace, users are never captive. If they cannot find the products or services they are looking for in Europe, they can access platforms operating from other jurisdictions in just a few clicks.
Regulation only really protects investors if they remain within its scope. However, it is precisely the opposite that could happen; a framework that is too demanding for European regulated players, while some users would continue to turn to less restrictive offshore platforms. In this scenario, Europe would have succeeded in creating one of the most advanced regulatory frameworks in the world, while the market would develop elsewhere. The history of crypto in France began with pioneering regulation. It could continue with exemplary regulation. However, if the balance between protection and innovation is not found, it could also end in a paradox: a structured ecosystem… but emptied of its actors. MiCA can become a strategic advantage for Europe; provided that it remains a living regulation, capable of adapting, of dialogue with the industry and of preserving the sector’s capacity for innovation. Without this balance, the regulation which was supposed to structure the ecosystem could well end up suffocating it.
All that remains is for players in the sector to reinvent themselves, to find the balance between regulatory requirements and market expectations.
