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The transition period
July 2026
With the Markets in Crypto Assets regulatory transition period ending on 1 July 2026, Matthew Challis explores the implications of a medley of digital asset regulations evolving into a unified framework, the hidden costs placed on fintech startups and crypto-native firms, and how big banks are benefiting the most
Image: songsak_c/stock.adobe.com
The European Securities and Markets Authority (ESMA) called for unauthorised crypto-asset service providers (CASPs) to cease their EU market operations by 1 July 2026.
Under Article 143, the Markets in Crypto-Assets (MiCA) transitional period officially came to an end, bringing a definitive close to the medley of regional exemptions that had historically allowed virtual asset service providers (VASPs) to operate throughout Europe.
The weeks preceding 1 July saw ESMA issue an uncompromising directive, in which the regulator called upon all unauthorised CASPs to initiate their orderly wind-downs.
Firms could no longer onboard EU clients and were subject to strict deadlines by which residual client positions were closed automatically, nor could they continue with marketing.
ESMA made it abundantly clear that a pending application is not permission to operate within the continent, and the outsourcing of custody services to unauthorised third parties was to remain strictly prohibited.
But the 1 July cessation of unauthorised market activity had one overarching objective: to end the era of fragmented regulatory regimes and unite the European Economic Area (EEA) under MiCA as the single, unyielding gateway to the region’s digital asset market.
What happened?
The publicly available CASP register paints a detailed picture of the impact of ESMA’s deadline. In December 2025 — coinciding with shorter national transitional windows implemented by specific EU member states, including Germany and Ireland — a wave of 44 firms were authorised under MiCA, a then-record. But this was superseded in June 2026, with 72 companies receiving authorisations in a single month as institutions scrambled to beat the 1 July outer boundary.
The logic behind this rush was remarkably straightforward: along with avoiding associated regulatory sanctions, the deadline was a race for market continuity and first-mover advantage. Under MiCA, obtaining authorisation from a single national competent authority — such as Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF) or France’s Autorité des marchés financiers (AMF) — unlocks passporting rights spanning all 30 countries of the EEA.
Rather than navigating a fragmented, country-by-country filing process, an institution can now passport its services across the entire EEA through a singular home-state license. This pathway has spawned a geographic concentration of capital, and authorisations have clustered heavily in a handful of highly respected jurisdictions. Germany leads the Union with 61 approved entities, followed by France with 31, the Netherlands with 28, and Cyprus and Malta tied with 22 each.
Shifting tides
For Nikolas Demetriade, a regulatory compliance specialist at CPDs.Academy, the transitional period coming to a close marked the end of the era for “fragmented national regimes”, with MiCA cementing itself as the “single gateway to the EU crypto-asset market”.
But perhaps the most striking facet of the transitory period’s end is the stark demographic shift among licensed entities.
TradFi financial incumbents — who have historically been hesitant to enter this, in their view, new and unknown market — have moved into the regulated crypto perimeter, absorbing the market footprint that once belonged to offshore or lightly regulated entities.
ESMA facilitated the transition for significant market players, as under Article 60 of MiCA, existing credit institutions and investment firms are provided a streamlined “opt-in” pathway. Instead of undergoing the full, several-month-long application process that is necessitated for new CASPs, established banks need only provide their home regulator with 40 days' notice prior to commencing their digital asset services. As such, commercial banks have hastily swallowed up approximately 20 per cent of the entire CASP register, according to Ledger Insights, an enterprise blockchain and DLT industry news publication and research portal.
This influx itself is visible across the continent: Spain’s BBVA and CaixaBank, Germany’s Commerzbank, France’s CACEIS Bank, and Standard Chartered Luxembourg can all be found within the MiCA register.
The banking trend continued up to the end of the transition period, with both private and TradFi names added to the ‘authorised’ list. Portugal’s Bison Bank, Croatia’s state-owned bank Hrvatska poštanska banka (HPB), Liechtenstein’s Kaiser Partner Privatbank, and two cooperative German banks, Volksbank Schwarzwald-Donau-Neckar and Raiffeisenbank Auerbach-Freihung, all having received approval from ESMA preceding 1 July.
As a result of Article 60, these large institutions are fundamentally reshaping the market’s maturity; digital assets now operate within a traditional, supervised perimeter.
The cost of MiCA
While regulatory clarity in and of itself is a net positive, the operational and financial reality of comprehensive compliance structures is fundamentally reshaping the digital assets ecosystem. The staggering cost of entry is driving rapid market consolidation, as MiCA compliance is, unsurprisingly, a capital-intensive undertaking. Patrick Gruhn, CEO of Perpetuals.com, an AI-powered fintech, claims that MiCA operating costs can reach as much as €700,000 in the first year and a further €250,000 annually thereafter for small firms, with figures for large exchanges running into several million per year. On top of these costs, MiCA requires a robust risk structure, physical office space, local personnel, strict capital reserves, and watertight custody policies, all of which may be a grave undertaking for smaller companies seeking to enter the market.
Yuliya Barabash, managing partner at SBSB Fintech Lawyers, believes that MiCA “underestimated business scale”. She argues that the framework created “one set of rules for everyone”, but not every crypto business is created equal, and “reviewing a local startup is very different from reviewing a global exchange operating across dozens of jurisdictions”. She believes that MiCA has had the opposite effect on the market, in that it was a process that was supposed to “create certainty”, but has instead become “one of the biggest commercial risks for crypto businesses”.
The framework itself was designed for deep pockets and excess capital, allowing established firms to meet the requirements with relative ease, leaving early-stage fintechs and crypto-native startups out to dry.
When the cost of regulatory architecture rises faster than expected returns, rational actors are forced to look elsewhere, often migrating to jurisdictions like Canada, shutting down entirely, or choosing to operate under the umbrella of an already-licensed CASP. Regulatory arbitrage has been replaced by an ecosystem dominated by heavily capitalised, compliance-first institutions.
Barabash notes that firms do not choose to operate from somewhere like Canada because it is better “in some abstract sense”; they do it because regulation, like any other cost, “has to be paid out of real money and real organisational capacity”.
“This matters because crypto projects are often not giant corporations with endless cash and in-house legal volcanoes,” she says. “They are startups, which, as a rule, do not enjoy spending their early life savings on office space, local staff and regulatory architecture before they have even figured out whether people want the product.”
Stablecoins
The consolidated landscape has birthed an institutional practical focus, in which stablecoins are to serve as the bridge for market access and digital liquidity. Legacy TradFi players are establishing bank-grade alternatives to the dollar-denominated stablecoins that have historically dominated the market.
One such example comes from Societe Generale-FORGE (SG-FORGE), which secured its Electronic Money Institution (EMI) license from France’s prudential regulatory authority to restructure its EUR CoinVertible (EURCV).
Jean-Marc Stenger, CEO of SG-FORGE, believes: “Robust and regulated stablecoins are essential for the proper functioning, security, and institutionalisation of crypto-asset markets.”
Yet, deploying a bank-backed stablecoin onto public networks introduces a difficult compliance paradox, in which, to achieve the deep liquidity necessary to compete with non-bank, dollar-backed giants — like Tether’s USDT or Circle’s USDC — the firm has supposedly designed EURCV to meet all the capabilities of an “open stablecoin”, prioritising “free transferability without whitelisting restrictions” so it can be integrated into public DeFi protocols.
For a regulated bank, this is a very risky operational decision as, without strict, address-level whitelisting, a bank is unable to perform continuous sanctions screening or identity verification on the parties holding its liability. Instead, it swaps the deterministic control of a supervised banking perimeter for the open-market effects of public chains.
Furthermore, multichain expansion — such as the deployment of EURCV across Ethereum, Solana, XRP Ledger, and Stellar — fragments liquidity. To prevent localised depegging and guarantee that an institutional treasurer can redeem a token for cash instantly on any network, the bank must rely on partnerships with crypto-native market makers, like Wintermute, to artificially support market depth and absorb cross-chain volatility. This introduces external, non-bank dependencies directly into the core settlement loop.
The next regulatory boundary
Even with the industry beginning to adapt to the post-transition market state of MiCA, the regulatory boundary is already beginning to move. The European Commission’s targeted consultations suggest that the rules may eventually be reshaped to align more closely with international developments — the US’s GENIUS Act being, perhaps, the most notable. Additionally, the pressing issues of stablecoin equivalence and third-country recognition, coupled with the need for highly fluid cross-border market access, are all still at the institutional forefront.
On the immediate horizon, the ambiguity between native crypto-assets and tokenised traditional instruments, such as onchain bonds and equities, remains a pressing challenge. Stefano Chierici, senior product manager of financial information at SIX, warns that if these onchain versions of TradFi assets are brought within MiCA’s scope, “banks and other regulated institutions could face an additional compliance layer for instruments already covered by existing securities regulation”.
This theoretical overlap sheds light on the increasing necessity of high-quality regulatory and reference data that spans the digital asset value chain. For banks to have compliance-ready operations in such a landscape, they must be able to accurately identify and understand what they are trading, which overlapping rules apply, and, above all, ensure compliant reporting.
Ultimately, the passing of the 1 July transition period has proven that controlled autonomy is the only viable path forward for institutional digital finance. MiCA, by establishing a unified regulatory perimeter, has removed the ambiguity that once plagued the market and resulted in institutional hesitation. Rather than an ecosystem dominated by potentially murky offshore startups, TradFi giants and highly compliant operators have been given the tools necessary to lead the way in this regulation-first approach.
For those who cannot afford to pay the newfound cost of EU operations, the gateway is now closed. But for those who remain standing, a new era of institutional-grade digital finance has officially been ushered in.
Under Article 143, the Markets in Crypto-Assets (MiCA) transitional period officially came to an end, bringing a definitive close to the medley of regional exemptions that had historically allowed virtual asset service providers (VASPs) to operate throughout Europe.
The weeks preceding 1 July saw ESMA issue an uncompromising directive, in which the regulator called upon all unauthorised CASPs to initiate their orderly wind-downs.
Firms could no longer onboard EU clients and were subject to strict deadlines by which residual client positions were closed automatically, nor could they continue with marketing.
ESMA made it abundantly clear that a pending application is not permission to operate within the continent, and the outsourcing of custody services to unauthorised third parties was to remain strictly prohibited.
But the 1 July cessation of unauthorised market activity had one overarching objective: to end the era of fragmented regulatory regimes and unite the European Economic Area (EEA) under MiCA as the single, unyielding gateway to the region’s digital asset market.
What happened?
The publicly available CASP register paints a detailed picture of the impact of ESMA’s deadline. In December 2025 — coinciding with shorter national transitional windows implemented by specific EU member states, including Germany and Ireland — a wave of 44 firms were authorised under MiCA, a then-record. But this was superseded in June 2026, with 72 companies receiving authorisations in a single month as institutions scrambled to beat the 1 July outer boundary.
The logic behind this rush was remarkably straightforward: along with avoiding associated regulatory sanctions, the deadline was a race for market continuity and first-mover advantage. Under MiCA, obtaining authorisation from a single national competent authority — such as Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF) or France’s Autorité des marchés financiers (AMF) — unlocks passporting rights spanning all 30 countries of the EEA.
Rather than navigating a fragmented, country-by-country filing process, an institution can now passport its services across the entire EEA through a singular home-state license. This pathway has spawned a geographic concentration of capital, and authorisations have clustered heavily in a handful of highly respected jurisdictions. Germany leads the Union with 61 approved entities, followed by France with 31, the Netherlands with 28, and Cyprus and Malta tied with 22 each.
Shifting tides
For Nikolas Demetriade, a regulatory compliance specialist at CPDs.Academy, the transitional period coming to a close marked the end of the era for “fragmented national regimes”, with MiCA cementing itself as the “single gateway to the EU crypto-asset market”.
But perhaps the most striking facet of the transitory period’s end is the stark demographic shift among licensed entities.
TradFi financial incumbents — who have historically been hesitant to enter this, in their view, new and unknown market — have moved into the regulated crypto perimeter, absorbing the market footprint that once belonged to offshore or lightly regulated entities.
ESMA facilitated the transition for significant market players, as under Article 60 of MiCA, existing credit institutions and investment firms are provided a streamlined “opt-in” pathway. Instead of undergoing the full, several-month-long application process that is necessitated for new CASPs, established banks need only provide their home regulator with 40 days' notice prior to commencing their digital asset services. As such, commercial banks have hastily swallowed up approximately 20 per cent of the entire CASP register, according to Ledger Insights, an enterprise blockchain and DLT industry news publication and research portal.
This influx itself is visible across the continent: Spain’s BBVA and CaixaBank, Germany’s Commerzbank, France’s CACEIS Bank, and Standard Chartered Luxembourg can all be found within the MiCA register.
The banking trend continued up to the end of the transition period, with both private and TradFi names added to the ‘authorised’ list. Portugal’s Bison Bank, Croatia’s state-owned bank Hrvatska poštanska banka (HPB), Liechtenstein’s Kaiser Partner Privatbank, and two cooperative German banks, Volksbank Schwarzwald-Donau-Neckar and Raiffeisenbank Auerbach-Freihung, all having received approval from ESMA preceding 1 July.
As a result of Article 60, these large institutions are fundamentally reshaping the market’s maturity; digital assets now operate within a traditional, supervised perimeter.
The cost of MiCA
While regulatory clarity in and of itself is a net positive, the operational and financial reality of comprehensive compliance structures is fundamentally reshaping the digital assets ecosystem. The staggering cost of entry is driving rapid market consolidation, as MiCA compliance is, unsurprisingly, a capital-intensive undertaking. Patrick Gruhn, CEO of Perpetuals.com, an AI-powered fintech, claims that MiCA operating costs can reach as much as €700,000 in the first year and a further €250,000 annually thereafter for small firms, with figures for large exchanges running into several million per year. On top of these costs, MiCA requires a robust risk structure, physical office space, local personnel, strict capital reserves, and watertight custody policies, all of which may be a grave undertaking for smaller companies seeking to enter the market.
Yuliya Barabash, managing partner at SBSB Fintech Lawyers, believes that MiCA “underestimated business scale”. She argues that the framework created “one set of rules for everyone”, but not every crypto business is created equal, and “reviewing a local startup is very different from reviewing a global exchange operating across dozens of jurisdictions”. She believes that MiCA has had the opposite effect on the market, in that it was a process that was supposed to “create certainty”, but has instead become “one of the biggest commercial risks for crypto businesses”.
The framework itself was designed for deep pockets and excess capital, allowing established firms to meet the requirements with relative ease, leaving early-stage fintechs and crypto-native startups out to dry.
When the cost of regulatory architecture rises faster than expected returns, rational actors are forced to look elsewhere, often migrating to jurisdictions like Canada, shutting down entirely, or choosing to operate under the umbrella of an already-licensed CASP. Regulatory arbitrage has been replaced by an ecosystem dominated by heavily capitalised, compliance-first institutions.
Barabash notes that firms do not choose to operate from somewhere like Canada because it is better “in some abstract sense”; they do it because regulation, like any other cost, “has to be paid out of real money and real organisational capacity”.
“This matters because crypto projects are often not giant corporations with endless cash and in-house legal volcanoes,” she says. “They are startups, which, as a rule, do not enjoy spending their early life savings on office space, local staff and regulatory architecture before they have even figured out whether people want the product.”
Stablecoins
The consolidated landscape has birthed an institutional practical focus, in which stablecoins are to serve as the bridge for market access and digital liquidity. Legacy TradFi players are establishing bank-grade alternatives to the dollar-denominated stablecoins that have historically dominated the market.
One such example comes from Societe Generale-FORGE (SG-FORGE), which secured its Electronic Money Institution (EMI) license from France’s prudential regulatory authority to restructure its EUR CoinVertible (EURCV).
Jean-Marc Stenger, CEO of SG-FORGE, believes: “Robust and regulated stablecoins are essential for the proper functioning, security, and institutionalisation of crypto-asset markets.”
Yet, deploying a bank-backed stablecoin onto public networks introduces a difficult compliance paradox, in which, to achieve the deep liquidity necessary to compete with non-bank, dollar-backed giants — like Tether’s USDT or Circle’s USDC — the firm has supposedly designed EURCV to meet all the capabilities of an “open stablecoin”, prioritising “free transferability without whitelisting restrictions” so it can be integrated into public DeFi protocols.
For a regulated bank, this is a very risky operational decision as, without strict, address-level whitelisting, a bank is unable to perform continuous sanctions screening or identity verification on the parties holding its liability. Instead, it swaps the deterministic control of a supervised banking perimeter for the open-market effects of public chains.
Furthermore, multichain expansion — such as the deployment of EURCV across Ethereum, Solana, XRP Ledger, and Stellar — fragments liquidity. To prevent localised depegging and guarantee that an institutional treasurer can redeem a token for cash instantly on any network, the bank must rely on partnerships with crypto-native market makers, like Wintermute, to artificially support market depth and absorb cross-chain volatility. This introduces external, non-bank dependencies directly into the core settlement loop.
The next regulatory boundary
Even with the industry beginning to adapt to the post-transition market state of MiCA, the regulatory boundary is already beginning to move. The European Commission’s targeted consultations suggest that the rules may eventually be reshaped to align more closely with international developments — the US’s GENIUS Act being, perhaps, the most notable. Additionally, the pressing issues of stablecoin equivalence and third-country recognition, coupled with the need for highly fluid cross-border market access, are all still at the institutional forefront.
On the immediate horizon, the ambiguity between native crypto-assets and tokenised traditional instruments, such as onchain bonds and equities, remains a pressing challenge. Stefano Chierici, senior product manager of financial information at SIX, warns that if these onchain versions of TradFi assets are brought within MiCA’s scope, “banks and other regulated institutions could face an additional compliance layer for instruments already covered by existing securities regulation”.
This theoretical overlap sheds light on the increasing necessity of high-quality regulatory and reference data that spans the digital asset value chain. For banks to have compliance-ready operations in such a landscape, they must be able to accurately identify and understand what they are trading, which overlapping rules apply, and, above all, ensure compliant reporting.
Ultimately, the passing of the 1 July transition period has proven that controlled autonomy is the only viable path forward for institutional digital finance. MiCA, by establishing a unified regulatory perimeter, has removed the ambiguity that once plagued the market and resulted in institutional hesitation. Rather than an ecosystem dominated by potentially murky offshore startups, TradFi giants and highly compliant operators have been given the tools necessary to lead the way in this regulation-first approach.
For those who cannot afford to pay the newfound cost of EU operations, the gateway is now closed. But for those who remain standing, a new era of institutional-grade digital finance has officially been ushered in.
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