Loopholes in EU's MiCA Regulation Threaten Effective Crypto Oversight

The European Union's pioneering cryptocurrency regulation, Markets in Crypto Assets (MiCA), will be fully implemented by December 30, 2024, but national compliance deficiencies are hampering its effective enforcement. According to the European Commission, only seven of the 27 member states have established the proper legal frameworks to enforce the regulation, posing a significant threat to investor protection and market integrity. The remaining 20 member states have failed to create the necessary national legislation, despite MiCA having entered into force in June 2023.

Critical areas remained unresolved during MiCA's design, particularly the decentralised finance (DeFi) sector, which falls outside the regulation's scope. Guidance on DeFi-specific regulation is only expected in 2026, when the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) will produce a detailed report on the subject. Further uncertainty stems from MiCA's unclear classification of non-fungible tokens (NFTs), which according to Hester Galacio, policy expert at Sumsub, creates opportunities for "creative compliance strategies." The lack of national authorities' preparedness and difficulties in uniform interpretation present additional challenges to effective implementation.

The European Commission has urged member states to urgently establish the necessary legal frameworks, emphasising that inadequate implementation could undermine financial stability and consumer protection. MiCA's primary objectives – protecting investors and ensuring market integrity – may be compromised if national regulations fail to consistently enforce the legislation. The delay in regulatory clarification for the DeFi sector until 2026 creates further uncertainty, while this sector continues to show significant growth in the European cryptocurrency market.

Sources:

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EU Crypto Regulation Hampered By National Flaws

The first EU-wide cryptocurrency regulation was meant to impose some harmony, but disparities in implementation by member countries has allowed companies to exploit a flaw in the system.

BarronsLucie LEQUIER

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EU Gears Up to Regulate DeFi in 2026 Amid MiCA Uncertainty
Lawmakers plan to clarify “decentralization” and bring DeFi protocols into regulatory scope by mid‑2026

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Policy Expert Says EU DeFi Clarification Is Coming in 2026

Policy Expert Says EU DeFi Clarification Is Coming in 2026 ✓ The Sumsuber - Best practices for KYC/AML

SumsubLuke Owain BoultContent Writer

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Kalkine: Loopholes in MiCA Crypto Regulation Challenge Uniform Oversight Across EU

Kalkine: Loopholes in MiCA Crypto Regulation Challenge Uniform Oversight Across EU

Kalkine Media ASX Share Market News & ResearchTeam Kalkine Media