Even after the European Union’s MiCA crypto regulatory regime has begun full implementation, some licensed companies could leave the market because they cannot shoulder high compliance costs, a forecast showed.

On July 21, blockchain outlet Cointelegraph reported that Gate Europe Chief Executive Giovanni Cunti (조반니 쿤티) said more operators may emerge over the long term that cannot withstand the costs of regulatory compliance and staffing burdens.

Cunti said having a MiCA licence and running a stable business are separate issues. "A significant number of companies that have secured MiCA licences may be unable, over the long term, to bear the costs and resources needed to sustain this business," he said.

MiCA is the EU’s crypto regulatory framework. Its 18-month transition period ended on July 1, and companies providing services to EU customers must be authorised or otherwise halt regulated services. Around the deadline, some exchanges restricted services or withdrew in parts of Europe. Binance, the world’s largest crypto exchange by trading volume, also failed to secure a MiCA licence by the deadline.

Tighter regulation is also weighing on the entry of new operators. Cunti said increasingly strict regulatory requirements are making it harder for new entrants to compete with existing operators. He also pointed out that while investor protection has strengthened, there is less room for innovation compared with regions with looser regulation.

Some projects may therefore choose regions other than Europe, he said. "We may need to be prepared for some projects, perhaps even important ones, to look at regions with different standards," Cunti said. That means they could push to launch in less restrictive jurisdictions instead of passing Europe’s regulatory framework.

Even so, the number of MiCA-authorised operators continues to rise. The European Securities and Markets Authority added 14 crypto-asset service providers to its register on July 18. That brought the total number of MiCA-authorised operators to 294. In its first update after the July 1 transition deadline, ESMA had added 37 companies.

Another assessment said a smaller number of operators could be an opportunity for those that remain. Cunti said a market where thousands once competed has now been reshaped into a few hundred, adding: "There is clearly a big opportunity for all of us." He added that operator shifts are under way because customers do not want to lose access to the market.

Against this backdrop, Europe’s crypto market appears to be reshaping around companies that can bear the cost of adapting to regulation. The points to watch are whether the number of MiCA-authorised firms will keep rising and whether projects leaving Europe due to regulatory burdens will actually increase.