EU orders unlicensed crypto firms to wind down before MiCA deadline

The European Securities and Markets Authority (ESMA), the EU’s financial markets watchdog, has ordered crypto firms without MiCA approval to shut down before the July 1 transition deadline. In a statement on the 23rd of June, the regulator said, 

ESMA expects unauthorized CASPs to take immediate steps to wind down their EU activities in an orderly manner, while also safeguarding clients’ interests and mitigating risks to market integrity.

Notably, the regulator warned unauthorized crypto asset service providers (CASPs) to immediately stop onboarding new EU clients and marketing services.

Additionally, the regulator wants unlicensed platforms to inform the clients of the wind-down process. Still, all anti-money laundering (AML) and terrorist financing procedures must be adhered to, as well. A similar procedure and AML checks will be required if clients are being transferred to a MiCA-authorized CASP.  

The Markets in Crypto Assets Regulation (MiCA) is the EU’s crypto regulator framework, which kicked off with a transition period in 2024. With the grace period closing on the 1st of July, unlicensed firms should cease operations. 

About 80% of the firms are likely to be impacted by the shift, and over 60% of EU crypto users will be forced to migrate to MiCA-authorized players. While some top industry firms like Ripple and Circle got MiCA approval, the world’s largest crypto exchange, Binance, hit a snag. Still, analysts have downplayed the potential impact of the regulatory pressure. 

Is Binance’s MiCA exposure overblown?

Binance tried to achieve MiCA approval via Greece. However, its efforts were blocked. Although the exchange said it will push for approval soon, many viewed the update as a potential regulatory pressure that could trigger capital outflows.

However, a crypto analyst dismissed the MiCA risk as ‘overstated,’ citing the low volumes tied to EUR-denominated trading. 

EUR-denominated trading pairs account for roughly 1% of Binance’s total spot trading volume, and that share has remained relatively stable despite recent headlines.

In May, Binance did about $250 billion in trading volume. Over the same period, the Europe-based exchanges collectively handled about $40 billion in volume. This shows Binance still had more offshore market share even without Europe. But the regulatory challenge could still force some top institutions to stay away from the exchange. 

Notably, OKX CEO Star Xu believes that the MiCA implementation marks a “new era of regulatory maturity in Europe.” However, it is unclear how unlicensed and MiCA-approved firms will adjust to the new EU framework.

Final Summary

• The EU regulator instructed unlicensed crypto firms to begin winding down and follow AML procedures. 
• Recent MiCA risk after Binance failed to get approval could be overstated, according to CryptoQuant.