What is a Crypto Exchange in Europe?

In common language, we use the term crypto exchange, but it means different things depending on who you ask, especially in Europe - European Economic Area due to its regulatory regime.

Crypto Trading by a Retail User

What a Crypto Exchange Actually Does In Europe?

At its simplest, a crypto exchange lets people trade crypto-assets. That means:

buying or selling Bitcoin, Ether, or other tokens — either against euros or against other crypto-assets

In practice, most European exchanges do much more than just “exchange”:

• They run trading platforms with order books

• They execute trades on behalf of clients, like a broker

• They offer simple buy/sell flows for retail users

• They hold clients’ crypto-assets in custody

• They connect crypto to banks through on- and off-ramps

Functionally, a crypto exchange looks a lot like a traditional financial intermediary. The difference is the asset class — crypto instead of shares or bonds.

Before 2025 and MiCA Regulation

AML First, Everything Else Later

Between 2017 and 2024, there was no EU-wide legal definition of a crypto exchange. Each Country treated it according to its own individual standards.

Regulation focused almost entirely on anti-money laundering. Under AMLD5, exchanges were treated as virtual asset service providers. That meant registration with a national authority, customer due diligence, transaction monitoring, and reporting obligations.

What it DID NOT mean was full financial regulation.

Most exchanges were not subject to capital requirements, conduct-of-business rules, or investor protection standards. Each Member State filled the gaps differently. Some were strict. Others barely regulated at all. The result was fragmentation and legal uncertainty. Hence, most foreign businesses would "shop around" for the best - usually easiest legislation whereto receive a license or authorization to operate as a crypto exchange. Take an example of Binance, operating under the name Bifinity UAB in Lithuania for almost half a dozen years.

MiCA Changes the Frame Completely

MiCA doesn’t try to define “crypto exchange” as a standalone concept. Instead, it introduces a broader category: Crypto-Asset Service Providers (CASPs).

If a business operates:

1. Crypto trading platform;

2. Exchanges crypto for fiat (in traditional Card Acquiring or OTC way);

3. Exchanges crypto for crypto (in traditional OTC way);

4. Executes orders for clients;

5. or provides custody
   

Then it is a CASP.

That’s the key shift.

Under MiCA, a crypto exchange is no longer just an AML-registered entity. It is a regulated financial service provider, with clear rules on governance, capital, risk management, safeguarding of assets, and operational resilience — applied consistently across the EU.

Licensing and Passporting

MiCA introduces a single EU licensing regime.

A crypto exchange must obtain authorization as a CASP from one Member State authority. To get that license, the firm must demonstrate proper governance, fit-and-proper management, sufficient capital, cybersecurity controls, and robust operational arrangements.

Once authorized, the exchange can passport its services across the EU. No more separate national registrations just to operate in different countries.

This is one of MiCA’s most practical changes — and one of the reasons many existing providers are restructuring their businesses now.

When MiCA Applies? Read it in our next series.