Compliance as Strategy: 5 Key Factors Transforming Europe’s Digital Asset Market

Entering the digital asset market in Europe isn’t just about technology and product innovation, it’s about navigating a complex regulatory environment. In other words, it’s about strategy. Whether you’re a bank exploring tokenized assets, a fintech offering crypto custody, or a payments company integrating stablecoins, compliance is non-negotiable. Aligning early with the EU’s evolving rulebook isn’t simply risk management, it’s a way to secure a competitive edge.

Below, we break down the five key regulations shaping Europe’s digital asset landscape, explained in plain language without losing precision.

1. MiCAR – The EU’s Single Rulebook for Crypto

The Markets in Crypto-Assets Regulation (MiCAR) is the EU’s first comprehensive regulatory framework for crypto-assets and their service providers. It establishes harmonized rules for offering and trading crypto-assets across all EU member states.It covers issuance, disclosure, licensing, and conduct of business.

For service providers, MiCAR means: one authorization process, one set of requirements, and direct passporting rights across the EU, but also stricter and harmonised compliance obligations, especially on transparency and investor protection.

Key Facts:

• Entered into force on 29 June 2023.

• Provisions on stablecoins (ARTs/EMTs) apply from 30 June 2024.

• The full scope, including crypto-asset service providers, becomes effectively applicable from 30 December 2024.

• Most jurisdictions provide a 6–12 month transition period after 30 December 2024, during which firms can adapt. After this grace period, a MiCAR license will be mandatory.

• Example transition periods: Germany – 12 months, France – 6 months, Italy – 12 months, Spain – TBD.

• One authorization grants access to all 27 EU member states, and associated EEA jurisdictions such as Liechtenstein.

• Harmonized rules on issuance, disclosure, governance, and conduct of business.

• Significant obligations around investor protection and transparency.

Why it matters:

• Creates the first EU-wide passporting regime for crypto services.

• Reduces fragmentation by replacing national regimes with a single rulebook.

• Imposes stricter compliance standards, leveling the playing field between traditional finance and digital assets.

• Early alignment with MiCAR will be a strategic advantage: firms that adapt quickly can expand across the EU seamlessly.

2. BaFin – National Licensing and Oversight in Germany

Even under MiCAR, national competent authorities like BaFin remain central to supervision. In Germany, the Federal Financial Supervisory Authority (BaFin) continues to play a central role, even under MiCAR. While MiCAR harmonizes EU-wide rules, national authorities like BaFin oversee licensing and supervision, and in Germany, this extends to Qualified Crypto Custody services such as security tokens and crypto securities, which remain under BaFin’s national competence.

For providers targeting the German market, this means preparing for in-depth scrutiny, especially if your business model involves custody, proprietary trading, or the issuance of certain tokenized instruments. Other EU states may take different approaches, but in Germany, BaFin’s involvement remains particularly strong.

In Germany, BaFin supervises around 1,740 banks and 674 financial services institutions.

Since early 2020, crypto assets and custody services have been incorporated under the German Banking Act (KWG); the Electronic Securities Act (eWpG) came into force in June 2021 to regulate digital securities

Key Facts:

• Supervises 1,740 banks and 674 financial services institutions.

• Crypto assets integrated into the Banking Act (KWG) since Jan 2020.

• Electronic Securities Act (eWpG) effective June 2021, enabling digital asset securities.

 Why it matters:

• MiCAR sets the framework, but BaFin defines implementation and interpretation in Germany, particularly for Qualified Crypto Custody.

• Expect deep scrutiny through detailed licensing processes, ongoing supervision, and thematic inspections, especially in custody, trading, and proprietary activities.

• Strong alignment with BaFin can enhance trust with German institutional clients.

3. DORA – Digital Operational Resilience

The Digital Operational Resilience Act (DORA) shifts operational resilience from best practice to legal requirement. DORA focuses on ICT risk management and operational continuity for financial entities, including those dealing with digital assets.

It applies from 17 January 2025 and replaces national frameworks such as the BAIT in Germany for digital asset providers, creating a single EU-wide standard.

It requires robust cybersecurity measures, incident reporting, resilience testing, and third-party risk oversight, ensuring your digital asset services can withstand outages, cyberattacks, and operational shocks.

Key Facts:

• Effective from 17 January 2025.

• Applies to financial entities including crypto-asset service providers.

• Focus: ICT risk management, cyber resilience, incident reporting, third-party risk.

• Replaces national IT frameworks (e.g. BAIT in Germany).

• Its objective is to ensure financial services can withstand and recover from cyberattacks, system failures, and operational disruptions. 

Why it matters:

• Brings IT security and resilience into regulatory scope for all financial entities, including banks and crypto-asset service providers.

• Creates consistency across the EU by harmonizing and replacing national rules like BAIT in Germany.

• Operational failures or breaches can result in regulatory sanctions.

• For banks, alignment with DORA is essential to maintain institutional credibility and trust with regulators.

• For crypto providers, compliance is equally critical to ensure resilience, customer trust, and smooth supervision.

• For any digital asset service provider, DORA compliance is essential to maintaining trust with customers, partners, and regulators.

4. KYC & AML – Safeguarding Trust in Digital Assets

Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements form the backbone of financial compliance, and digital assets are no exception. Together, they ensure that crypto services are not misused for illicit purposes and that providers maintain trust with regulators, partners, and customers.

KYC: The Starting Point
KYC obligations were first introduced at the EU level through the 5th Anti-Money Laundering Directive (AMLD5) in 2020, marking the very first EU law to explicitly regulate digital assets and their service providers. Under MiCAR and subsequent AML directives, these requirements are reinforced and expanded.
KYC focuses on verifying customer identity, conducting due diligence, and assessing risk before onboarding.

AML: Beyond Onboarding
KYC is only the beginning. Once a customer relationship is established, AML obligations take over, requiring providers to monitor transactions, detect suspicious activity, and report it to regulators. With the new EU Anti-Money Laundering Authority (AMLA), oversight will soon be centralized, making enforcement more consistent across member states.

Key Facts:

• Derived from AMLD5 (2020), the first EU law covering digital assets.

• Required under AMLD5, MiCAR, and national AML laws.

• KYC: onboarding checks, beneficial ownership identification, risk-based monitoring.

• AML: continuous monitoring, suspicious activity reporting, and sanctions screening.

• AMLA (operational by 2025) will centralize EU-wide enforcement.

• New AML regulations will be implemented from 10 July 2027 with the implementation of AMLD6 and the AML Regulation contained therein, which represents a uniform regulation for all EU member states.

Why it matters:

• KYC enables safe entry of retail and institutional customers into digital asset products.

• AML prevents misuse of digital asset channels for money laundering or terrorist financing.

• Together, they provide a complete compliance framework: KYC ensures you know your customers, AML ensures you know what they do over time.

• Strong KYC/AML practices are essential for cross-border credibility and institutional trust.

• Same rules, same obligations – uniform EU money laundering regulations ensure a level playing field for all companies subject to AML obligations, regardless of which Member State the financial services provider is located in.

5. Transfer of Funds Regulation (TFR) – The “Travel Rule”

The EU’s Transfer of Funds Regulation (TFR), also known as the Travel Rule, extends existing rules for wire transfers to crypto-asset transfers. Its goal is to prevent money laundering and terrorist financing by ensuring that information about the sender and recipient travels with every crypto transaction.

Key Facts: 

• Adopted on 29 June 2023.

• Applies from 30 December 2024, in parallel with MiCAR.

• Some obligations (e.g., specific reporting requirements) started applying earlier in 2024.

• Applies to all crypto transfers, regardless of amount.

• Requires originator and beneficiary information to accompany transfers.

• Extends AML obligations into the operational layer of crypto payments.

• Covers both CASPs (crypto-asset service providers) and traditional financial intermediaries handling crypto.

Why it matters:

• Introduces stricter transparency standards for crypto transfers across the EU.

• Aligns the EU with global FATF recommendations.

• Adds another compliance layer on top of KYC/AML: even if customers are verified, transaction details must still be recorded and transmitted.

• For digital asset providers, implementing TFR means upgrading infrastructure to capture, transmit, and reconcile data alongside transactions.

Practical Steps for Entering the EU Digital Asset Market

While the regulatory journey looks different for digital asset providers, banks, and payments companies, the core principle is the same: early preparation builds trust with regulators and unlocks market access.

For Digital Asset Providers

• Gap Analysis: Assess current operations against MiCAR requirements.

• Regulatory Engagement: Connect early with national competent authorities (BaFin, AMF, CNMV, etc.).

• Resilience Planning: Build DORA-compliant ICT and operational resilience frameworks.

• KYC/AML Upgrade: Implement systems to handle crypto-specific risks (e.g., blockchain analytics tools).

• Travel Rule Readiness: Build infrastructure to capture and transmit originator/beneficiary data with every crypto transfer.

• Pilot Programs: Launch limited-scope products to validate processes before scaling.
  

For Banks

• Regulatory Gap Analysis: Assess current capabilities against MiCAR, DORA, AML/KYC, and the Transfer of Funds Regulation (TFR).

• Early Engagement: Consult with national authorities (e.g., BaFin) before product launch.

• Resilience Planning: Implement DORA-aligned ICT and cyber risk frameworks.

• Enhanced KYC/AML: Deploy tools for blockchain transaction analysis and risk scoring.

• Travel Rule Readiness: Build infrastructure to capture and transmit originator/beneficiary data with every crypto transfer.

• Pilot Programs: Start with controlled offerings to validate processes and build regulator confidence.

For Payments Companies & Stablecoin Issuers

• MiCAR Stablecoin Provisions: Prepare for ART/EMT requirements from 30 June 2024, including capital, reserve, and redemption obligations.

• Liquidity Management: Put in place frameworks to meet MiCAR’s reserve and safeguarding rules.

• TFR Readiness: Integrate originator/beneficiary data transmission into stablecoin and payments flows.

• Regulatory Engagement: Liaise with supervisors early to clarify treatment of stablecoin issuance and settlement.

• Operational Alignment: Ensure compliance across both payments regulation (PSD2/PSR) and MiCAR.

Many institutions choose to work with specialized custodians to ease this burden. At Tangany, we already cover the complex regulatory requirements for custody, transfers, and staking on behalf of our partners, and we adapt flexibly to their needs, regardless of company type or how they interact with digital assets. This allows them to focus on building products and scaling their business.

Early Adopters – The Direction of Travel

• Deutsche Bank (≈ €1.6 trillion AUM) is seeking a BaFin license for digital asset custody.

• Sparkassen-Finanzgruppe (≈ €2.3 trillion AUM) plans to integrate retail crypto trading into its Sparkasse app by mid-2026, potentially reaching 50 million users.

• Standard Chartered has opened a Luxembourg hub to provide EU-wide custody services for digital assets.

• Bybit EU is implementing NASDAQ surveillance tools to comply with MiCAR’s oversight requirements.

• In Ireland, fintechs and crypto firms are ramping up preparations for MiCAR, positioning the country as a growing hub despite the compliance challenges.

• Spain’s BBVA has already received approval to offer Bitcoin and Ether trading to its customers. 

• Société Générale’s SG Forge in France secured a DASP license from the AMF in July 2023, the first full crypto/permitted service provider license in France,  enabling it to offer custody, trading, and exchange of digital assets.

• BVNK (a VASP in Spain) is preparing for full compliance with the EU’s Transfer of Funds Regulation (Travel Rule) by 30 December 2024, adapting its platforms and processes ahead of the deadline.

• The European Banking Authority (EBA) issued Travel Rule guidelines in July 2024, clarifying the information that CASPs and PSPs must transmit with every crypto transfer.

These moves signal that regulated digital asset services, from both traditional financial institutions and native crypto providers, are poised to become mainstream across the EU.

Bottom line  – Key Takeaways

• Compliance in the EU isn’t a box-ticking exercise; it’s a competitive advantage.

• Early alignment with MiCAR, BaFin, DORA, KYC/AML, and the Transfer of Funds Regulation (TFR) builds trust and unlocks EU-wide market access.

• Partnering with a regulated custodian like Tangany can simplify the path by handling custody, transfers, and staking.

 Conclusion – Compliance as a Competitive Edge

Providers that align early will be first to market with compliant offerings. Regulatory readiness isn’t just risk management; it’s a strategic differentiator in winning institutional and retail trust. The EU framework, once fragmented, is moving toward global leadership in regulated digital asset markets.

For many institutions, navigating this evolving regulatory landscape requirements can feel overwhelming. The real challenge isn’t knowing the rules; it’s executing them effectively. Partnering with a regulated custodian like Tangany helps simplify this journey: we take care of the legal and operational complexity around custody, transfers, and staking, so our partners can focus on what matters most, innovation and scalable growth.