The following is a guest post from Yuliya Barabash, Founder and Managing Partner at SBSB Fintech Lawyers.
MiCA may make Europe safer, but it also risks making it smaller. In its effort to impose order on crypto, the EU is building a regulatory framework that many early-stage startups simply cannot afford to comply with. Yet in pursuing either control or freedom, both sides are missing what actually makes the market work.
MiCA is not perfect, and it is certainly not cheap, but that is precisely why it matters. In a crypto market long defined by regulatory arbitrage, uneven standards, and too many firms treating compliance as optional, the European Union has chosen legal certainty, investor protection, and long-term market trust.
It is no secret that this choice frustrates some founders—and it should. What founders often miss, however, is that the first duty of regulation is not to maximize the number of startups at any cost but to create conditions in which the firms that do operate can be trusted by users, banks, partners, and regulators.
Why MiCA matters
A common criticism is that MiCA sets the bar too high for new entrants. The capital, paperwork, governance, safeguarding, ICT, outsourcing, and local presence requirements combine to create costs that smaller projects may struggle to bear. In my view, that criticism is valid.
But that is also the point. Crypto is no longer a hobby market. As I tell my clients during consultations, once a company handles customer assets, payment flows, or exchange activity, it is no longer enough to promise innovation and hope the rest will sort itself out later.
Startups that remain in the market under MiCA are more likely to have solid compliance frameworks and clearer governance. That matters because the greatest damage to the crypto sector’s reputation has rarely come from overregulation.
It has come from failures, hacks, poor controls, misleading promises, and platforms that grew too quickly without the operational maturity to sustain that growth.
Another often-overlooked point is that Europe is not trying to become the loudest crypto jurisdiction in the world. It is trying to become the most credible one. Industry players are far more likely to engage with a sector that has predictable rules and enforcement. In the long run, that credibility can become one of the market’s strongest advantages.
What MiCA misses
At the same time, the central flaw in the EU’s approach is that it treats crypto as though the sector were already mature enough to absorb traditional financial regulation at full weight.
In reality, crypto innovation still depends on experimentation and low-cost iteration. What those enforcing MiCA seem to overlook is that new companies need room to test models, adjust products, and survive the uncertain period before revenue becomes stable.
MiCA narrows that window dramatically. It effectively asks startups to behave like regulated incumbents before they have even proved they belong in the market.
As Elijah Podavalkin, an active European technology operator and finance executive, recently noted:
“Europe is basically Silicon Valley’s unpaid internship because we’re not serious about innovation and money every year. Europe trains world-class engineers, researchers and founders, yet a disproportionate share of the value gets created somewhere else.”
His point captures a broader truth: Europe often develops talent well but does not always retain the value that talent creates. The real risk is that Europe may end up filtering out the very companies most capable of bringing new ideas to market.
The real debate
Supporters of MiCA will argue that serious firms should welcome the discipline. I see the point, but that argument misses the issue of scale. A startup with ten employees and limited runway cannot carry the same regulatory load as a multinational platform.
If Europe wants a crypto ecosystem that grows locally rather than pushing innovation elsewhere, its rules need to be more closely aligned with a project’s risk profile and stage of maturity.
Otherwise, Europe may end up with a cleaner-looking crypto sector that is less open, less competitive, and less capable of producing the next generation of financial tools. That, in my opinion, is a high price to pay for order.
