MiCA compliance is the main catalyst that will separate winners from losers across Europe’s crypto industry. Companies that embrace the framework’s rigorous standards won’t just stay afloat; they’ll dominate, using compliance as a strategic weapon to outpace competitors, drive mergers and acquisitions, and secure their position in a rapidly consolidating market.

MiCA’s introduction is poised to ignite a surge in mergers and acquisitions across Europe’s crypto sector, as regulatory compliance becomes a key driver of deal-making. Firms that master MiCA’s standards won’t just protect their market positions — they’ll gain a competitive edge, leveraging compliance credentials to attract partners, investors and buyers. Consolidation will be a natural response to rising operational costs, with smaller players seeking alliances in order to survive and thrive. Meanwhile, I foresee larger firms capitalizing on similar opportunities to expand their footprints.

This wave of consolidation will most likely signal a major shift in the competitive dynamics of the European crypto sector. As smaller firms struggle to shoulder the costs of compliance, their strategic value to larger, more resourceful players will only grow. For acquirers, MiCA-compliant firms represent a safer bet, offering established infrastructure, robust internal controls and governance systems already aligned with regulatory demands. With MiCA emphasizing operational soundness and investor protection, these companies will become prime targets, reducing risks and accelerating post-acquisition integration. In this new era, compliance won’t just be a cost — it’ll be a mechanism for growth, reshaping the competitive landscape.

The framework itself sets a high bar for transparency and accountability. Under MiCA, any firm planning to invest in or acquire a crypto-asset service provider (CASP) or an asset-referenced token (ART) issuer must notify the national competent authority (NCA) in their EU member state in writing. CASPs, which include companies offering services like trading, custody or asset transfers, will now face detailed regulatory reviews to ensure the deal complies with MiCA’s strict standards.

The acquiring party must also provide detailed information to the NCA to facilitate an evaluation of the proposed acquisition or any expansion of an existing qualifying stake. Regulatory due diligence will play a critical role in these transactions under MiCA.

Key factors for approval include the reputation and leadership track record of the acquiring party, the ongoing compliance of the target ART issuer or CASP with MiCA regulations, and the financial stability of the acquirer. These elements will be closely scrutinized to ensure that both parties meet MiCA’s stringent standards.

While NCAs have other measures that will factor in, it’s clear that MiCA compliance is critical for M&A success. Firms that have clearly established controls in place will be the winners, independent of which aisle of the deal they sit on.

Firms that fail to comply with MiCA, however, will face serious challenges in the M&A market as their regulatory gaps make them riskier and less appealing to buyers. Non-compliance can lead to fines, expensive fixes or devaluation during due diligence. For non-EU firms, acquiring a MiCA-compliant company to attempt to benefit from the “grandfathering period,” might seem like an easy way to enter the European market, but this comes with strict ESMA oversight. Regulators will be focused on ensuring investor protection and proper integration of EU-regulated functions, meaning non-EU firms must avoid tactics like regulatory loopholes or improper solicitation that could raise red flags.

MiCA-compliant firms will remain attractive targets for non-EU companies seeking easier entry into the European market. Without a MiCA license, non-EU firms risk being excluded from the EU entirely, as the reverse solicitation principle “should be understood as very narrowly framed and as such must be regarded as the exception; and it cannot be assumed, nor exploited to circumvent MiCA.” To succeed, non-EU acquirers must fully integrate and comply with MiCA’s requirements to meet EU regulatory standards and operate smoothly within the region.

As regulatory scrutiny intensifies, MiCA’s strict approval process — focused on reputation, financial stability and compliance — will ensure that only the most prepared companies thrive in post-acquisition integrations. Firms that fully embrace MiCA’s framework will be best positioned to lead, setting new standards for trust, innovation and sustainable growth in Europe’s evolving crypto ecosystem.

Source : Blockworks - Nov 19, 2024