Europe is closing the door on offshore crypto, but it’s leaving the riskiest window open
While the EU's MiCA framework regulates spot crypto trading, it leaves a significant loophole for offshore perpetual futures platforms. These high-leverage derivatives remain largely unregulated in Europe, posing substantial risks to retail investors.
Why it matters
Identifies a critical regulatory gap in European financial policy that could lead to significant investor losses in the crypto derivatives market.
Regulators in the EU have set a July 1 deadline for unauthorized crypto asset service providers to wind down operations, but the enforcement crackdown only applies to spot trading. Crypto derivatives, including perpetual futures (also called “perps”), are not covered under MiCA’s jurisdiction. That would be a defensible position for regulators to take if perps were a harmless product that was carefully policed by another authority. They’re neither.The majority of crypto trading volume — roughly 80% according to data from Glassnode — takes place in the crypto perpetual futures market. A crypto perpetual is effectively a contract of difference. Traders post margin and take leveraged directional exposure to a price they never actually own. The difference between those prices is then settled in cash.
The article presents a critical analysis of regulatory gaps, citing industry data and expert perspectives.
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