Crypto assets have emerged as one of the fastest growing sectors in global finance, offering ample opportunities for retail and institutional investors. With revenues in Europe projected to grow by more than 30% annually, Europe is well-positioned to take advantage of the growth of this dynamic sector, but it must adapt and adapt quickly otherwise it risks being left behind.
The recent adoption of the Markets in Crypto-Assets (MICA) regulation by the European Union (EU) was an important step in supporting the continent’s crypto industry adoption and has helped Europe establish itself as a hub for well-regulated and responsible operators.
The early days of implementing new continent-wide regulation covering the complex, innovative and fast-moving crypto sector have naturally highlighted areas where additional action or clarity is needed. However, ten months after MiCA came into force, Europe finds itself in a uniquely strong position to set the regulatory gold standard when it comes to oversight of the sector.
To maintain this advantage, European regulators must continue to work quickly, collaboratively and be prepared to learn as we go. This will be essential to ensure that regulation does not lag too far behind the industry and that it effectively reduces risk without creating unnecessary regulatory burden, so that the inherently innovative nature of the sector is protected.
Malta leads by example
Prior to the launch of MiCA, Malta was the first European country to implement a full licensing regime for crypto-asset service providers (CASPs). The Virtual Financial Assets (VFA) Act was adopted in 2018, and builds on existing European legislation such as the Markets in Financial Instruments Directive (MiFID), the Markets in Financial Instruments Regulation (MiFIR), the Prospectus Regulation, the Transparency Directive and the Market Abuse Regulation. was developed in consultation with supranational and peer national competent authorities (NCAs).
As the country’s sole regulator of financial services, the Malta Financial Services Authority (MFSA) built considerable capacity and expertise to adequately supervise the country’s crypto industry under the VFA Act, as well as gained practical experience of supervising crypto companies, which have since gone on to secure MiCA licenses in Malta. During this time, it invested resources through initiatives such as the Financial Supervisors Academy (FSA), a training program designed to support the development of a pipeline of talent with the skills needed to effectively oversee the sector. The MFSA has also adopted advanced supervisory tools to complement more traditional financial surveillance mechanisms, such as blockchain analytics and market surveillance systems. Malta did all this at a time when many jurisdictions were not even thinking about regulating digital assets – and, over time, it has proven to be highly effective when it comes to monitoring CASP, as shown by these measures being widely adopted by regulators in Europe and beyond.
embrace the investigation
As an early adopter of regulation in the crypto sector, the MFSA earlier this year welcomed the European Securities and Markets Authority (ESMA) peer review process, which concluded in July. The final report recognizes various strengths and areas of good practice when it comes to the regulation of digital assets in Malta, which is highly encouraging and should give further confidence to companies considering licensing.
Naturally, the report also identified some areas where there was room for improvement, and we immediately began implementing the recommendations made in the report for both Malta and National Competent Authorities (NCAs) across Europe. We are finalizing the implementation and review of all internal processes to ensure compliance with ESMA Peer Preview.
Enhanced supervision and enforcement
Recognizing the need to enhance capabilities and capacity to ensure effective implementation, the MFSA has also increased investment in its supervisory and enforcement teams and processes. The MFSA held 1,345 supervisory interactions in 2024, a 33% increase on 2023 and a threefold increase since 2020. In the same year, 134 enforcement actions were taken, including 126 administrative penalties, 4 directives, 2 license revocations and 2 reprimands.
setting the record straight
The peer review process was also an opportunity to address the myth that Malta is rushing into granting licenses at the expense of thorough scrutiny in application processing. This is a misconception. Throughout our preparation phase, the MFSA demonstrated extraordinary responsiveness and agility – but under no circumstances did we compromise rigor, oversight or regulatory integrity. We were able to move quickly because preparations for MiCA implementation were extensive and began two years ago. Additionally, a robust and comprehensive process is followed before granting a license to any firm. It began in November 2023 when the first industry event was held to raise awareness about the various requirements to obtain a MiCA license. A series of supervisory meetings were held throughout 2024, as well as an in-depth review of the preparation of potential applicants. The process included a comprehensive assessment toolkit and verification of all requirements by at least two officials to avoid error. The basis for all this preparation was the last seven years of supervisory experience that we gained through the Malta VFA Act.
The MFSA is a tight regulator. That said, a quick look at the ESMA interim register shows that Malta is not alone in issuing MiCA licenses, with 58 CASP licenses issued so far across 11 countries. Apparently, no operator has been granted a MiCA license by the MFSA in a matter of days.
Looking forward, not back
During these first nine months of MiCA implementation, there is a clear but time-sensitive opportunity for NCAs in Europe and beyond to learn and improve. As we look to raise the bar, scrutiny is not something to be feared or avoided, but should be embraced as an opportunity to learn, improve and demonstrate what is working well, as well as identify areas where greater clarity is needed. This should be a reason to move forward with greater speed and determination, rather than slowing down and risking being left behind. Ultimately, there must be an ongoing and ongoing process of learning and adoption if Europe is to successfully take advantage of the $100 billion opportunity presented by the digital assets sector.