European regulators push for crypto oversight standardization amid MiCA implementation gaps

Since January 2025, the MiCA (Markets in Crypto-Assets) regulation has officially taken effect across the EU, aiming to create a unified framework for crypto market participants. However, the reality on the ground reveals significant inconsistencies in how Member States are applying these rules, creating new challenges for the sector.

The application gap: a problem disguised as bureaucracy

The divergence in regulatory execution is striking. Germany has already distributed over 30 crypto licenses, predominantly to traditional banking institutions. By contrast, Luxembourg has approved only three licenses, prioritizing established players with substantial track records. This fragmentation undermines the core objective of MiCA: establishing consistent rules for all market participants.

Such regulatory fragmentation creates what experts call regulatory arbitrage—businesses strategically choose jurisdictions with more favorable conditions, distorting fair competition across the bloc. According to industry observers, the inconsistency is not a minor implementation issue but a fundamental problem. As noted by stakeholders in the sector: “There is a very, very uneven application of regulation.”

The concerns are not limited to license distribution numbers. Other critical areas show similar divergence. For instance, MiCA mandates that custodians return assets held for clients “immediately,” yet this term lacks a precise legal definition. Different national regulators interpret it differently, creating confusion and slowing adoption, especially among traditional financial institutions considering entry into crypto services.

ESMA steps forward: from oversight to central coordination

Responding to these inconsistencies, the European Securities and Markets Authority (ESMA) has begun asserting a more prominent role. In November 2024, ESMA released a critical assessment, identifying significant shortcomings in how certain national regulators implement MiCA. Malta’s financial authority, for example, faced particular scrutiny for only partially meeting licensing standards.

This escalation signals a broader shift in Europe’s regulatory philosophy. Several major EU countries—France, Italy, and Austria—are now openly supporting enhanced coordination through ESMA rather than maintaining purely national-based supervision. The reasoning is pragmatic: a unified regulatory interpretation would accelerate market development and eliminate arbitrage opportunities.

As industry voices suggest: “From a purely practical point of view, having a unified application of the regulation would be beneficial.”

The centralization model: learning from the ECB

Rather than dismantling national regulators, Europe is moving toward a hybrid model that mirrors how the European Central Bank operates. Under this framework, ESMA would establish core standards and provide direct oversight of critical functions, while national regulators transition into technical support roles for localized implementation.

This restructuring addresses several immediate needs. First, it creates a single point of reference for compliance, making it easier for market participants to operate across borders. Second, it reduces the incentive for regulatory shopping. Third, it allows Europe to develop a coherent stance in global crypto governance—positioned as an alternative framework to the U.S. SEC model.

With blockchain networks like Solana, Avalanche, and Cosmos expanding, and institutional capital increasingly flowing into digital assets, having clear and consistent regulatory standards has become essential for investor protection and market credibility.

Key regulatory milestones in the EU crypto framework

• 2025: MiCA enters full effect; stablecoin provisions delayed until 2026
• License distribution disparity: Germany has granted 30+ licenses versus Luxembourg’s 3
• ESMA’s November 2024 report: Highlighted compliance gaps in national implementations
• Institutional support: France, Italy, and Austria backing ESMA coordination
• Outstanding issues: Legal clarification needed on terms like “immediate return” of custodial assets

The path forward suggests that Europe is not abandoning national regulators but restructuring how oversight operates. By centralizing certain functions under ESMA while maintaining local expertise, the EU aims to achieve regulatory consistency without eliminating national involvement. This evolution reflects both the complexity of crypto markets and Europe’s determination to establish itself as a credible, independent regulatory authority in the global digital asset landscape—distinct from, and competitive with, existing U.S.-centric models.