The Markets in Crypto-Assets Regulation (MiCA) is reshaping Europe’s crypto market, while exposing new regulatory challenges, according to Cyprus Securities and Exchange Commission (CySEC) chairman George Theocharides.

In an article first published in Eurofi magazine, Theocharides described MiCA as a structural shift for the EU crypto-asset market, explaining that a sector once operating largely outside a harmonised regulatory framework is now subject to common rules, authorisation requirements and supervisory oversight across the European Union.

“The Markets in Crypto-Assets Regulation represents a structural shift for the EU crypto-asset market,” he said.

He added that the transition is already delivering tangible benefits, particularly through improved legal certainty and clearer regulatory expectations for both firms and users operating within the bloc.

“This transition is already generating tangible benefits, notably through enhanced legal certainty and regulatory clarity for firms and users,” he said.

Theocharides explained that MiCA reduces fragmentation by introducing clear classifications for crypto-assets, including asset-referenced tokens (ARTs), e-money tokens (EMTs) and other crypto-assets, while establishing a harmonised compliance baseline across member states.

Moreover, he pointed out that investor protection has been significantly strengthened through stricter authorisation requirements for crypto-asset service providers, covering governance standards, internal controls, conflict of interest management, safeguarding of client assets and operational resilience.

Theocharides also highlighted that market integrity has been reinforced through the introduction of a crypto-specific market abuse regime addressing insider dealing and market manipulation, bringing greater transparency and fairness to previously under-regulated markets.

He added that MiCA’s passporting regime enables authorised firms to expand across the EU under a single licence, supporting cross-border activity and contributing to the integration of the internal market.

However, he cautioned that as implementation progresses, several practical challenges are beginning to emerge, particularly around how certain provisions operate in practice.

“A key issue concerns Article 60 of the regulation,” he stated.

Theocharides explained that this article assumes entities already authorised under other EU frameworks can begin offering crypto-asset services through a simple notification process, but in reality, crypto activities often involve unique and complex risks.

“In practice, crypto-asset activities often entail specific and idiosyncratic risks that require adjustments to governance structures, risk management frameworks, custody arrangements and digital operational resilience systems,” he mentioned.

“A simple notification may not always adequately address these risks,” he added.

The article also pointed to difficulties in applying MiCA to decentralised models, noting that while fully decentralised activities are excluded, defining the boundary between decentralisation and regulated intermediation remains unclear.

“While the regulation excludes fully decentralised activities, determining where decentralisation ends and regulated intermediation begins is not clear cut,” Theocharides said.

He warned that these hybrid models can create legal uncertainty regarding responsibility and compliance obligations, making clearer regulatory guidance necessary.

Theocharides further identified classification challenges, particularly around ARTs, which must be distinguished from EMTs and traditional financial instruments to fall under the appropriate regulatory regime.

“In practice, however, ARTs often resemble traditional investments, creating a grey area between MiCA regulation and MiFID II,” he said.

Looking ahead, Theocharides stated that the EU crypto market is expected to move towards deeper integration with traditional financial services, shifting the regulatory focus accordingly.

He explained that this evolution will require ensuring coherence between MiCA and the broader financial framework rather than treating crypto as a standalone sector.

From the perspective of a smaller member state, Theocharides said proposals for greater EU-level supervision of large cross-border crypto-asset service providers raise important strategic considerations.

He acknowledged that centralisation could improve consistency in high-impact cases but stressed that such an approach must remain proportionate and aligned with the principle of subsidiarity.

“Centralisation can enhance consistency in certain high-impact cases, but it should be proportionate and consistent with subsidiarity,” he said.

Theocharides cautioned that overly centralised supervision could concentrate activity in a limited number of member states or weaken the connection between regulators and local market conditions.

“There is a risk that overly centralised approaches could concentrate activity in a few Member States or weaken the link between supervision and local market realities,” he stated.

He argued that differences in supervisory approaches across member states do not necessarily indicate inefficiency, as national regulators often have a deeper understanding of local markets and risks.

Theocharides added that their proximity to firms can support more effective and efficient oversight.

“The key question is therefore whether centralisation is always the best answer or whether clearer Level 1 rules, combined with stronger checks and balances around convergence tools, could resolve the problem more effectively,” he said.

The article further mentioned that, like any pioneering regulatory framework, MiCA’s implementation phase has revealed areas where further guidance, supervisory convergence and targeted refinements may be required.

Finally, Theocharides stressed that while MiCA has already significantly improved regulatory clarity, its long-term success will depend on continuous supervision, evolving guidance and careful calibration as crypto-assets increasingly converge with traditional finance.