The global regulatory landscape for digital assets experienced a seismic shift in 2024 and 2025. This transformation was led by the European Union’s comprehensive Markets in Crypto-Assets Regulation (“MiCAR”) and pioneering stablecoin regimes emerging in the Middle East. These developments have altered both international and regional approaches to compliance and oversight for market participants.
Europe’s Paradigm Shift: MiCAR and the Compliance Imperative
Europe’s regulatory overhaul places MiCAR as the benchmark in digital assets regulation, establishing unified standards across twenty-seven EU member states. The regulation became fully operational in December 2024, but the phased introduction of requirements: for instance, stablecoin provisions began in June 2024, followed by broader authorization standards for Crypto-Asset Service Providers later in the year has created an intricate compliance environment. MiCAR also divides crypto-assets into separate regulatory buckets, such as asset-referenced tokens and e-money tokens.
It also imposes strict prohibitions, including the explicit ban on interest payments related to stablecoins, a significant deviation from certain other global regulatory approaches. The implementation process has not been uniformed either: various EU states have interpreted the transitional period differently, with some permitting operations to continue until July 2026 and others demanding immediate compliance from December 2024, especially in rigorous jurisdictions like Lithuania and Slovenia. Such fragmentation presents unique challenges for firms operating across multiple jurisdictions.
Compliance with MiCAR does not exist in isolation. It is deeply intertwined with broader EU regulations such as the Digital Operational Resilience Act (“DORA”), which applies stringent operational requirements and mandates regular ICT risk assessment. The Transfer of Funds Regulation (“TFR”), known as the Travel Rule, imposes additional obligations by requiring comprehensive disclosures for crypto transfers, ensuring that every transaction is accompanied by clear originator and beneficiary information.
The Middle East Leadership & Bahrain’s Stablecoin Framework
The Middle East, and Bahrain in particular, has emerged as a hub for digital asset innovation, as evidenced by considerable on-chain value flows. Bahrain secured this by launching the first comprehensive stablecoin regulatory framework within the Gulf Cooperation Council. The Stablecoin Issuance and Offering (“SIO”) Module, introduced in July 2025, sets out stringent licensing requirements by requiring stablecoin issuers to obtain formal licensing, back their tokens with high-quality liquid assets. Mandates such as minimum paid-up capital of BHD 250,000 and robust AML/KYC protocols seek to ensure this.
Distinctively, Bahrain’s regulatory innovation includes a progressive stance on yield-bearing stablecoins, enabling passive returns from reserve asset investment: an approach diverging sharply from MiCAR’s prohibitive stance on stablecoin interest payments. The region has recorded an estimated $338.7 billion in on-chain value flow between July 2023 and June 2024. Regional peers such as Dubai and Abu Dhabi continue to enhance regulatory clarity through their respective frameworks, with Dubai’s Virtual Assets Regulatory Authority (“VARA”) introducing enhanced margin trading and minimum standards as of May 2025, while Abu Dhabi’s Financial Services Regulatory Authority (FSRA) unveiled its Fiat-Referenced Tokens (“FRTs”) framework in December 2024.
Implications on India’s Domestic Market
The changing global regulatory environment, marked by the introduction of MiCAR in the European Union and Bahrain’s stablecoin regime in the Middle East, carries distinct implications for India’s domestic market. India’s regulation of Virtual Digital Assets is still managed through amendments to legacy laws. These include the imposition of a 30% tax on gains, a 1% TDS, and the requirement for VDA Service Providers to register with the Financial Intelligence Unit-India pursuant to the March 2023 amendment under the Prevention of Money Laundering Act. Unlike MiCAR’s unified system which applies consistent rules across 27 EU member states and precisely classifies digital assets, India’s regulatory environment remains fragmented, complicated by an absence of standalone digital asset legislation and continued divergence between principal regulators including SEBI and RBI.
From a legal perspective, MiCAR’s comprehensive standards and cross-border applicability mean Indian crypto businesses with exposure to the EU market must contend with stricter consumer protection, operational, and AML/CFT requirements, notably the ban on interest payments for stablecoins and rigorous reporting obligations, while Bahrain’s stablecoin regulatory model requires asset backing and robust compliance arrangements. India, meanwhile, has moved toward some global alignment through the adoption of the FATF Travel Rule, reflecting a commitment to international AML/CFT norms similar to those codified in the EU and GCC regimes.
These regulatory convergences and divergences continue to shape operational requirements, compliance strategies, and cross-border activity for VDA businesses, exchanges, and projects. The complexity of multi-jurisdictional digital asset oversight now demands attentive monitoring of rule changes, implementation timelines, and region-specific regimes that directly impact the market, possibly serving as reference points for India’s own regulatory trajectory.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
