CRYPTO-ASSETS IN EASTERN EUROPE: BETWEEN MARKET FORMALIZATION, INNOVATIONS, AND MICA REGULATORY IMPLEMENTATION

Abstract

This article examines the impact of the MiCA Regulation on crypto-asset markets in Eastern Europe, focusing on Lithuania, Poland, and Ukraine, and evaluates the regulatory trade-off between market formalization, innovation capacity, and compliance costs. The study is based on comparative and institutional analysis and is set against global crypto flows, showing that Eastern Europe, especially Ukraine, has one of the highest levels of crypto adoption per capita. In the region, virtual assets serve not only as innovative financial instruments but also as practical means of value preservation, cross-border transfers, and financial mobility under inflationary pressure, macroeconomic instability, and wartime shocks. The methodological analysis demonstrates that MiCA substantially improves financial transparency, consumer protection, and overall institutional trust, but at the same time increases operational obligations and entry barriers for small and medium-sized providers. This creates a serious risk of unwanted market concentration and may push part of the local legal segment into less competitive positions. The study also shows that the effects of regulation depend heavily on transitional regimes. For instance, rigid and short adaptation periods can accelerate consolidation, while excessive postponement may generate legal uncertainty and structural imbalances. For Ukraine, where the legal framework for virtual assets remains incomplete, simple transposition of Eastern Europe rules without adaptation to domestic economic conditions may intensify shadow-market activity. To mitigate these risks, the paper proposes a flexible implementation model based on proportionality, gradualism, and predictable compliance rules, including a moderate transition period and phased regulatory requirements. The findings indicate that effective crypto regulation should balance legalization, innovation, and financial security while preserving the competitive viability of the legal market and supporting sustainable economic development and European regulatory convergence.