Come back
In recent years, crypto assets (i.e., virtual assets, including primarily cryptocurrencies, tokens, and other digital instruments) have become a stable part of the global financial ecosystem. However, until 2023, the European Union (EU) had a rather fragmented and inconsistent approach to their regulation. The response to this development is the Markets in Crypto-Assets Regulation (MiCA), which was approved in 2023 and is gradually being implemented from 2024 onwards. MiCA brings greater legal certainty and transparency to the world of crypto assets, aims to enhance investor protection, and ensure market stability for digital tokens. Despite this, many uncertainties remain in practice, particularly regarding cooperation between crypto firms and the banking sector.
This article aims to analyze what makes MiCA groundbreaking and highlight specific reasons why banks continue to reject crypto businesses.
1. What Exactly Does MiCA Regulate, and What Are Its Goals?
MiCA is a fairly extensive and complex regulation designed to unify rules for the crypto asset sector across EU member states. Until now, states primarily relied on anti-money laundering directives (AMLD – Anti-Money Laundering Directives, such as Directive (EU) 2018/843 known as 5th AMLD, or Directive (EU) 2019/2177, the 6th AMLD) and their own national laws. This resulted in situations where a crypto company was accepted in one country while facing excessive regulatory burdens or almost no ability to operate in another.
MiCA aims to:
- Establish a single licensing regime for crypto-asset service providers (CASPs – Crypto-Asset Service Providers).
- Introduce stricter regulation of stablecoins, especially E-Money Tokens (EMT) tied to a currency or a basket of assets.
- Increase transparency in the issuance of new crypto assets and protect investors from fraudulent practices.
- Enable cross-border passporting – a license granted in one EU member state should be valid in others under MiCA.
From a legal perspective, MiCA is a regulation, meaning it is directly applicable in all member states without the need for national transposition, which significantly simplifies and speeds up harmonization.
2. Benefits of MiCA and First Challenges in Practice
Thanks to MiCA, the crypto sector has gained a relatively stable regulatory framework, which brings several advantages:
- Legal certainty: Crypto businesses will no longer have to navigate the legislation of each EU member state they wish to operate in.
- Consumer protection: Mandatory publication of whitepapers and information sheets will help investors make informed decisions and reduce exposure to fraudulent projects.
- Increased stablecoin security: MiCA introduces stricter capital requirements and reserve mechanisms, which may stabilize the stablecoin segment.
However, MiCA also presents some practical challenges:
- Increased administrative burden and compliance costs: Smaller businesses may be discouraged from entering the market due to the high costs of meeting licensing requirements and regulatory reporting, which could be crippling for startups.
- Potential monopoly of large players: Strict regulations often favor large financial institutions or well-established exchanges with sufficient capital reserves to meet complex requirements, potentially stifling innovation.
- Challenges in uniform supervision: MiCA sets general rules, but enforcement is left to national regulators, which may lead to inconsistencies in implementation and sanctions.
3. Why Do Banks Still Reject Crypto Firms?
One of the most pressing issues remains the difficulty for crypto firms to obtain basic banking services. While MiCA is supposed to legitimize the crypto sector, banks remain highly cautious and reject most crypto-related clients. Why is this the case?
1. Fear of Money Laundering and Terrorist Financing:
Despite MiCA and AMLD enforcing strict AML (Anti-Money Laundering) and KYC (Know Your Customer) rules, banks worry that monitoring blockchain transactions is complex, making it harder to identify illicit activities. If a bank fails to detect suspicious transactions, it risks severe penalties from regulators.
2. Unclear Tax and Legal Aspects:
Besides AML directives, uncertainty persists regarding tax treatment of crypto-related income and how to properly report and tax crypto gains or losses. This legal uncertainty contributes to banks viewing crypto clients as high-risk.
3. Conservative Approach to Innovation and Reputation Risk:
Many traditional banks still perceive cryptocurrencies as highly volatile speculative assets. They also fear negative publicity if their accounts were found to facilitate illicit transactions. Some banks lack the necessary expertise to properly assess crypto-related risks.
4. De-risking Instead of Individual Assessment:
In banking, there is a practice known as de-risking, where banks avoid entire categories of high-risk clients instead of assessing each business individually. Due to media coverage of hacks, dark web marketplaces, and fraud, the crypto sector is labeled as high-risk, leading banks to reject all potential crypto clients rather than conducting a detailed risk assessment.
As a result, many crypto firms seek alternative payment solutions (including non-bank financial institutions) or open accounts in jurisdictions with a more crypto-friendly banking sector.
4. Legal Arguments and Practical Reality: What Is the Current Regulatory Landscape?
In the EU, MiCA is complemented by other regulations affecting banks’ relationships with crypto firms:
- AMLD Directives (5th AMLD, 6th AMLD) – impose enhanced oversight of virtual assets and require suspicious transaction reporting. Banks rely on a risk-based approach, evaluating clients’ business models.
- Regulation (EU) 2015/847 on fund transfers – requires verification of transaction origin and purpose, which is less transparent for crypto transactions than traditional bank transfers.
- EBA (European Banking Authority) and ESMA (European Securities and Markets Authority) regulations – issue guidelines emphasizing thorough risk assessment for crypto clients.
Banks feel pressured from multiple directions: they must comply with regulatory requirements (AML, tax reporting, client verification), and if they fail, they face severe penalties. As a result, many banks prefer to completely avoid crypto clients rather than bear the costs of compliance.
5. Possible Improvements and Future Outlook
Despite ongoing skepticism, some banks are beginning to explore crypto opportunities. Key factors that could improve cooperation include:
1. Unified Risk Assessment Methodology:
If EU banking authorities (EBA, ESMA) and national regulators establish clear, standardized criteria for assessing crypto clients, banks may become more willing to engage with them.
2. Advanced AML/CFT Technology Solutions:
Blockchain forensic tools can trace transaction history to detect illicit activities. If banks better understand these technologies, they could reduce risk while serving crypto firms.
3. Lessons from Pilot Projects:
Some EU banks are testing limited partnerships with regulated crypto firms under strict AML requirements. Successful case studies could pave the way for broader adoption.
4. Education and Reducing Biases:
Lack of understanding of crypto technology among bank executives and regulators leads to persistent fears. Training programs could bridge this knowledge gap and ease concerns.
6. Final Thoughts: Is MiCA a Revolution or Just the Beginning of a Long Road?
MiCA represents a significant milestone in EU crypto asset regulation. It establishes a unified framework, strengthens investor protection, and sets clear rules for stablecoins. However, its success depends on harmonized implementation and banks’ willingness to adapt.
Despite MiCA, banks remain hesitant to engage with crypto firms due to compliance risks, regulatory uncertainty, and reputational concerns. The practical impact of MiCA will depend on:
- How EU member states enforce the rules and handle cross-border licensing.
- Whether banks adopt new blockchain compliance tools.
- Further legislative clarifications regarding tax and accounting treatment of crypto transactions.
From a legal standpoint, MiCA is a major leap forward, as it formally defines crypto asset categories and regulatory conditions. However, in business practice, it has yet to change the status quo: most crypto companies still struggle to access banking services.
MiCA is thus best seen as a starting framework rather than a final solution. Real progress will come from regulatory experience, technological advancements, and growing cooperation between banks and crypto firms.
Bibliography and Legal References
- Regulation (EU) 2023/… (MiCA) – Official text published in the EU Official Journal.
- Directive (EU) 2018/843 (5th AMLD) and Directive (EU) 2019/2177 (6th AMLD) – Strengthening anti-money laundering efforts.
- Regulation (EU) 2015/847 on financial transfers.
- EBA and ESMA guidelines on crypto assets – Available on their official websites.
