1. Before MiCA: every country with its own rules
Until 2023 the EU crypto market ran on a patchwork of national regimes. Malta passed a dedicated law, Liechtenstein another, France and Luxembourg their own. Hungary went no further than amendments to its personal income tax law. The result was regulatory arbitrage: firms registered where it was most convenient rather than where they did business.
Fragmentation made cross-border operations difficult for providers and left investors without common protection standards. With no shared rules, the same token could be legal in one country and prohibited in the next. That is not the basis on which a single internal market is built.
Policy challenge: Divergent national regimes created the conditions for regulatory arbitrage and for uneven levels of investor protection. The EU responded by moving from recommendations to binding, uniform rules.
2. MiCA: the world’s first comprehensive framework
In October 2020 the European Commission presented the Digital Finance Package, a set of legislative initiatives for regulating digital finance. Its central element was the Regulation on Markets in Crypto-Assets (MiCA, Regulation (EU) 2023/1114), adopted in May 2023 and fully applicable from 30 December 2024.
[FIGURE] What MiCA regulates
Source: Regulation (EU) 2023/1114. URL: https://eur-lex.europa.eu/eli/reg/2023/1114/oj/eng
3. The digital finance package: MiCA is not alone
MiCA is the best-known part of the EU digital package, but not the only one. Several other acts were adopted alongside it, and together they form a complete regulatory architecture.
DLT Pilot Regime (Regulation (EU) 2022/858): a pilot regime for blockchain-based market infrastructures. Firms can test new models of trading in digital assets in a controlled environment — an EU-level equivalent of a regulatory sandbox.
DORA (Regulation (EU) 2022/2554): digital operational resilience for the financial sector. It sets requirements for cybersecurity, IT risk management and operational continuity for all financial institutions, crypto-asset service providers included.
Transfer of Funds Regulation (Regulation (EU) 2023/1113): transparency requirements for transactions. It extends the FATF travel rule to crypto transfers — both the sender and the recipient must be identified.
DAC8 (Directive (EU) 2023/2226): automatic exchange of information on crypto transactions between the tax authorities of EU member states. Providers file data that is then distributed automatically across jurisdictions.
How the acts connect: DORA protects the infrastructure, the Transfer of Funds Regulation tracks the flows, DAC8 secures tax transparency. MiCA is the frame; the rest are the bricks. Without all four, the building does not stand.
[FIGURE] Fig. 1. The EU digital finance package: how the acts connect
Source: compiled from Regulation (EU) 2023/1114, 2022/858, 2022/2554, 2023/1113, Directive (EU) 2023/2226 and OECD CARF 2022.
4. Who supervises: the EBA and ESMA
MiCA resolved a supervisory problem that had gone unaddressed until its adoption. Before 2023 ESMA and the EBA could only issue consumer warnings, with no power to require anything specific of firms. Their mandates are now set out in law.
ESMA (European Securities and Markets Authority): regulatory technical standards for crypto-asset service providers (CASPs), the register of authorised providers, coordination between national regulators, and EU-level supervision of significant asset-referenced tokens (ARTs) and e-money tokens (EMTs).
EBA (European Banking Authority): technical standards for issuers of e-money tokens and asset-referenced tokens, prudential requirements, and coordination with central banks on the monetary risks of stablecoins.
The single passport principle is the central innovation. A firm authorised as a CASP in Estonia can serve clients in France, Poland and Austria without any additional permissions. This is a fundamental departure from banking, where such a passport took decades to put in place.
5. From soft law to hard law: why the EU opted for binding regulation
Until 2020 the EU regulated crypto through soft law — recommendations, guidance and warnings that carried no legal consequences for non-compliance. Three factors changed that strategy at once.
Rising capitalisation. The crypto market passed USD 2 trillion in 2021 — a scale at which a regulatory gap becomes a systemic risk.
The TerraLUNA collapse (2022). Over three days in May 2022 the algorithmic stablecoin UST lost its dollar peg and pulled the linked LUNA token down with it. More than USD 40 billion in market capitalisation evaporated within a week. Imagine a large bank going under in a matter of days — with no deposit guarantees and no mechanism to protect those who lost money. It was this collapse that convinced the EU that voluntary recommendations (soft law) were not enough and that binding legislation with real liability (hard law) was needed.
FATF pressure. The Financial Action Task Force, the international anti-money laundering body, required the EU to introduce identification of the parties to crypto transactions. Without legislation, that is impossible.
6. AML/CFT: anti-money laundering built into the system
MiCA is integrated with EU anti-money laundering legislation (Directive (EU) 2015/849). For crypto businesses this translates into specific obligations: customer identification (KYC — Know Your Customer), transaction monitoring, reporting of suspicious operations, and enhanced due diligence for clients from higher-risk jurisdictions.
Important: enhanced due diligence applies to clients from countries that FATF assesses as having strategic deficiencies in their AML/CFT regimes. If Ukraine ends up on the FATF grey list, that will automatically mean tighter checks for every Ukrainian client of crypto services in the EU. The risk is real, not hypothetical.
What this means for Ukraine: if regulation is not launched on time and FATF records systemic deficiencies, Ukrainian citizens and companies will face heightened compliance checks on every EU platform. Transaction costs rise and some services become unavailable.
7. Binding on candidate countries: a condition, not a choice
For states seeking EU membership, MiCA standards become binding within the accession negotiation chapters, primarily the Financial Services chapter. Ukraine cannot join the EU without full crypto regulation compatible with MiCA.
In practice this means three things: adopting laws that comply with EU regulations; reforming or creating supervisory authorities with real powers; and — hardest of all — ensuring that those laws are actually enforced rather than existing only on paper.
The first step is under way (Draft Law No. 10225-d is being prepared for a vote); the second is partly done (the National Bank of Ukraine (NBU) and the National Securities and Stock Market Commission (NSSMC) have been designated as regulators, but without a coordination mechanism). The third — effective enforcement — depends on whether the system as a whole is launched on time.
8. Conclusions
In three years the EU moved from a patchwork of national regimes to the world’s first comprehensive supranational system of crypto regulation. MiCA, DORA, DAC8 and the Transfer of Funds Regulation are four laws that together do one thing: they give business a single set of rules across the EU, protect investors and track suspicious money.
For Ukraine, this architecture is more than a reference point. It is a condition of accession. And the longer the adoption of Draft Law No. 10225-d drags on, the wider the gap grows between what the EU requires and what Ukraine has in place.
Sources
1. Regulation (EU) 2023/1114 (MiCA). URL: https://eur-lex.europa.eu/eli/reg/2023/1114/oj/eng
2. Regulation (EU) 2022/858 (DLT Pilot Regime). URL: https://eur-lex.europa.eu/eli/reg/2022/858/oj/eng
3. Regulation (EU) 2022/2554 (DORA). URL: https://eur-lex.europa.eu/eli/reg/2022/2554/oj/eng
4. Regulation (EU) 2023/1113 (Transfer of Funds). URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1113
5. DAC8 — Directive on Administrative Cooperation. URL: https://taxation-customs.ec.europa.eu/
6. Digital Finance Strategy (European Commission, 2020). URL: https://finance.ec.europa.eu/publications/digital-finance-package_en
7. Directive (EU) 2015/849 (AML). URL: https://eur-lex.europa.eu/eli/dir/2015/849/oj/eng
8. The Financial Services negotiation chapter: what needs to be done to bring Ukraine closer to EU accession [in Ukrainian]. Centre for Economic Strategy, October 2024. URL: https://ces.org.ua/wp-content/uploads/2024/09/finansovi-poslugi-1.pdf
9. Wronka C. Crypto-asset activities and markets in the EU. Journal of Banking Regulation. 2024. No. 25(1). Pp. 84–93.
10. Tsvyetkov A. Legal regulation of cryptocurrencies in Europe. Scientific Journal of the National Academy of Internal Affairs. 2024. Vol. 29, No. 4. Pp. 47–60.
11. MIT Sloan CFI / NBER. Anatomy of a Run: The Terra Luna Crash. 2023. URL: https://mitsloan.mit.edu/cfi/anatomy-a-run-terra-luna-crash
12. CoinMarketCap. Global Crypto Market Cap historical data, 2021. URL: https://coinmarketcap.com/charts/
Note on the use of AI: This material was prepared with the use of artificial intelligence tools (Claude, Anthropic) for structuring, analysing and editing the text. Responsibility for content, verification of data and the final editorial decision rest with the authors.
EU Ready: from negotiations to opportunities | Series “European integration: crypto regulation”, article 2 of 4 | uifuture.org
The views, assessments and conclusions set out in this article are the personal position of the author and do not necessarily reflect the official position of the Ukrainian Institute for the Future, its partners or its donors.
This publication was produced by the NGO Ukrainian Institute for the Future with the support of the Askold and Dir Fund, administered by ISAR Ednannia under the project “Strong Civil Society of Ukraine — a Driver of Reforms and Democracy”, funded by Norway and Sweden. The content of this publication is the responsibility of the NGO Ukrainian Institute for the Future and does not reflect the views of the governments of Norway or Sweden or of ISAR Ednannia.
