Crypto for Advisors: Europe's crypto rules, U.S. Preview

Happy Thursday, advisors!

In today’s newsletter, Maria Golenkovexplains how the EU’s MiCA framework is the blueprint for future U.S crypto regulation. Learn why your governance and controls need to align now to avoid scrambling later.

Then, in “Ask an Expert,” Felix Xu answers questions around why operational risk is the primary investment risk in digital assets, explaining the specific internal controls advisors must demand.

Happy reading.

MiCA’s final deadline just hit in Europe. U.S. advisors should be taking notes.

Right now, America's crypto regulatory landscape is fragmented across multiple agencies. The Securities and Exchange Commission (SEC) regulates one thing, the (CFTC) another, FinCEN handles its piece, and then you have state-level requirements on top. No master playbook. No unified vision. The European Union, meanwhile, finished writing theirs in 2023, implemented it through 2024 and has been enforcing it since. The Markets in Crypto-Assets Regulation, or MiCA, is now the standard everyone in Europe has to meet. And as of July 1, 2026, the grace period is over. The transitional window that let firms keep operating under old national rules expired with no extensions. Serve EU clients now and you need full authorization, or you wind down.

This matters because Europe always moves first on financial regulation, and America follows. It's happening now, and most advisors aren't paying attention yet.

So what does MiCA require? If you offer crypto services like custody, advisory or exchange, you need a license and a regulator watching what you do. Client assets get segregated, independently audited and monitored in real time. Capital and transparency requirements apply. Companies explain risks to clients in plain language, not legalese.

I raise this because what happens without those controls is ugly. Galois Capital lost 50% of assets on FTX, which wasn't even a qualified custodian. Binance faced SEC and CFTC enforcement in 2023 for improper asset segregation and inadequate risk disclosures. It managed billions. It still didn't have proper governance. This wasn't incompetence; this was what happened when the rules were unclear, so companies gambled on legality.

For years, the US operated in enforcement mode. Coinbase launched staking and got sued. Binance took deposits and got sued. Nobody knew if they were inventing a service or breaking a law. The agencies weren't being malicious; they just didn't have a framework. That shifted in September 2025, when the SEC and CFTC issued a joint statement clarifying that registered exchanges could facilitate trading of certain spot crypto products. Then in March 2026 they went further, publishing joint guidance on which crypto assets are securities and which aren't, and how stablecoins fit in.

The firms that run into problems are the ones with too much fragmented data and no disciplined process for classifying it. By the time an audit or regulatory request comes in, the team may be trying to reconstruct activity from wallet histories, spreadsheets and employee knowledge. That is where small inconsistencies become expensive. The better approach is to build reporting into the transaction process itself. Every material transaction should have a clear business purpose, an approver, a valuation source, and a documented accounting treatment at the time it occurs. Accurate reporting is usually the result of good operational design rather than a more sophisticated year-end cleanup.

Q. Best way for people to stay on top of crypto accounting, governance and technological change.

The answer is not to follow every headline. In a market that changes this quickly, information without a framework can create more noise than insight. Firms should establish a disciplined review process that separates changes requiring immediate action from developments that are merely interesting. Regulatory releases, accounting guidance, custody rules, tax interpretations and material protocol changes should be assigned to specific owners and reviewed on a defined schedule. External accountants, legal counsel, administrators and technical specialists can provide important perspective, but someone inside the organization must remain accountable for translating that advice into policies, controls and operating decisions.

The strongest organizations also create a feedback loop between the investment, operations, finance, legal and technology teams. A new protocol feature may appear to be an investment opportunity, but it can also change custody assumptions, valuation methods, liquidity risk or reporting obligations. Those implications need to be considered before capital is deployed, not discovered during an audit. Digital asset firms do not need to predict every technological or regulatory development. They need governance structures that allow them to evaluate change consistently, document their decisions and adapt without weakening the controls around client capital.

- Felix Xu, co-founder, ZX Squared Capital

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