How the transitional period works for the companies applying for MiCA

As of 30 December 2024, the MiCA Regulation has become mandatory for all crypto-asset service providers (CASPs) operating within the EU. However, companies that were already registered under national frameworks are eligible for a transitional period of up to 18 months. It is essential to note that this period does not automatically grant the right to continue operations. Misjudging the timeline or regulatory requirements may result in license loss or forced business closure. In this article, we provide a detailed explanation of the MiCA transitional regime, outlining the necessary steps and strategies to mitigate legal and operational risks.

When did MiCA come into force and what does the transition period mean?

Since 29 June 2023, the MiCA Regulation has been officially in force, but its provisions are being implemented in stages. As of June 30, 2024, the requirements apply to stablecoin issuers. From December 30, 2024, they will extend to all crypto-asset service providers (CASPs), including exchanges, custodians, brokers, payment providers, and other market participants.

To avoid a disruptive transition, MiCA includes a special transitional period governed by Article 143 of Regulation (EU) 2023/1114. It allows companies already registered or licensed under national legislation in an EU Member State to continue operating without a MiCA license for a limited time, provided they meet specific conditions.

This transitional regime:

1. Applies only if the company was registered VASP before 30 December 2024;
2. Does not grant the right to passport services to other EU countries.

The duration of the transitional period may vary depending on the position of each EU Member State and can range from 5 to 18 months. That is why companies must clarify their national regulator’s approach in advance and strictly adhere to all deadlines.

Who can take advantage of the transition period?

The MiCA transitional regime is not available to all crypto market participants but only to those companies that were already registered or licensed at the national level before 30 December 2024. The purpose of this mechanism is to ensure a smooth transition from national regulatory frameworks to a harmonized EU-wide approach, without creating abrupt legal barriers for lawfully operating entities.

According to Article 143 of MiCA, the transitional period applies exclusively to crypto-asset service providers (CASPs) that were registered and licensed as VASPs in an EU Member State before 30 December 2024.

Important: If a company was not officially registered or had its license revoked before 30 December 2024, it is not eligible for the transitional regime and must suspend operations until it obtains MiCA authorization.

Conditions for retaining the right to operate

Even with valid national registration, CASPs are required to:

1. Notify the national regulator of their intention to make use of the transitional period;
2. Submit a MiCA license application before the end of the transitional period, as determined by the Member State to keep operating;
3. Continue to comply with all applicable AML/CFT, KYC, and internal control obligations under both EU and national law.

Submitting a license application during the transitional period

Companies operating under the transitional regime are required to:

1. Submit a complete MiCA license application to the competent authority within the defined timeframe (generally within 12 months of 30 December 2024, but as little as 5 or 6  months in some countries);
2. Continue operating under their previous national registration until a final decision is issued on their application;
3. Cease operations immediately after the transitional period ends if the license is denied.

National regulators also have the right to terminate transitional authorization early if they identify violations of AML rules, deficiencies in internal documentation, or risks to clients.

Risks and limitations of the transitional period

Although the MiCA transitional regime allows companies to continue operations without a full license temporarily, it does not exempt them from regulatory responsibility and may involve certain legal and operational risks. Companies that plan to “wait it out” without preparation may face business disruption, fines, or even loss of their registration rights.

Temporary nature of legal status

The primary risk lies in the temporary and conditional nature of the authorization during the transitional period. Specifically:

1. CASPs are not entitled to passport their services across the EU until they obtain a full MiCA license;
2. If a license is denied after regulatory review, the company must immediately cease providing all services;
3. National authorities may terminate the transitional status early if violations are identified.

Heightened scrutiny from regulators

Crypto companies operating under transitional status are subject to increased scrutiny from national regulators, the European Securities and Markets Authority (ESMA), financial intelligence units, and tax authorities.

These bodies may conduct audits to verify AML/CTF compliance, assess business models, review KYC policies, and evaluate technical infrastructure. Failure to align internal documentation and risk management procedures with MiCA standards may result in license denial or even regulatory sanctions during the transitional phase.

How to prepare for the transitional period?

The transitional period is not a reason to delay MiCA licensing preparations — on the contrary, it is a valuable opportunity to adapt without interrupting business operations. Companies that use this time wisely will not only maintain continuity but also gain a competitive advantage in the EU market.

Legal and technical preparation

To successfully obtain a MiCA license, companies should proactively:

1. Conduct a compliance audit of their current operations with MiCA requirements (including Articles 60–64 on internal procedures, risk management, and client asset protection);
2. Update internal policies on AML, KYC, IT security, and conflict of interest management;
3. Prepare a clear business model description, financial statements, ownership structure, and ultimate beneficial ownership (UBO) information;
4. If necessary, strengthen or modify technical infrastructure, especially regarding custody and trading systems.

Companies that conduct pre-licensing diagnostics and address weaknesses in advance are far more likely to receive MiCA approval without objections.

Regulator engagement

During the transitional period, it is critical to maintain open and constructive communication with the national supervisory authority:

1. Notify the authority in due time about the intention to operate under the transitional regime;
2. Submit a complete and accurate application package in line with MiCA requirements;
3. Maintain transparent correspondence, provide clarifications, justifications, and additional materials as requested;
4. Be prepared for preliminary reviews and interviews involving company management and legal representatives.

Many regulators, including BaFin, MFSA, and FCIS, have already issued public guidelines on how to prepare for MiCA. Following these recommendations is a mandatory step toward successful adaptation.

How Key2Law can help your company through the MiCA transition period

Transitioning to MiCA is not just about obtaining a license - it’s a full transformation of your compliance model and operational structure. Mistakes at this stage can cost a company its right to operate in the EU. The Key2Law team offers comprehensive support for crypto companies throughout the entire transitional period, including licensing preparation and engagement with regulators. We assist with:

1. Determining whether your company qualifies for the transitional regime and identifying the applicable deadlines in your jurisdiction;
2. Conducting a readiness audit and resolving compliance gaps in documentation, procedures, corporate structure, and IT systems;
3. Preparing a complete application package for MiCA licensing, including a business plan, risk analysis, AML/KYC policies, and internal procedures;
4. Establishing effective communication with the regulator, preparing for inspections, interviews, and official information requests;
5. Providing regulatory protection in cases of license denial, operational suspension, or early termination of the transitional regime.

By partnering with Key2Law, you gain not just advisory  assistance - you secure a strategic partner ready to help your company meet MiCA requirements and confidently scale across the European Union. Contact us today to navigate the transitional period efficiently, transparently, and without disruption.