The 28th Regime may fail — And EU cannot afford for it to

The proposed 28th regime is framed as a structural response to fragmentation in the internal market. Its ambition is clear: offer an optional European legal framework that allows innovative companies — particularly in technology, fintech and digital assets — to scale across borders without navigating 27 separate systems.

From the perspective of innovators, the promise is simplicity and speed.From the perspective of regulators, the objective is harmonisation and legal certainty.

The question is whether the design currently envisioned can realistically satisfy both.

This article does not argue against harmonisation. Rather, it examines where institutional architecture may fall short — and where constructive recalibration could strengthen the initiative before it hardens into another procedural layer.

Key takeaways

• Regulatory uncertainty deters precisely the compliant actors the regime seeks to attract. When enforcement remains nationally fragmented, risk premiums increase and cautious innovators delay market entry.

• Many existing EU frameworks already function effectively. Passporting, MiCA supervision, and digital identity infrastructure show that targeted centralisation can work.

• Some frictions are structural, not technological. Administrative layering — particularly AML-related processes — has slowed incorporation more than technological limits ever did.

• Industry responds best to structured dialogue. Regulatory sandboxes, transparent supervisory guidance, and formalised feedback mechanisms reduce uncertainty more effectively than optional new corporate forms.

The promise and the institutional reality

The 28th regime seeks to offer notably a unified company law framework operating alongside national systems. In theory, this reduces cross-border legal friction.

In practice, enforcement would likely remain with national courts and authorities. That creates a structural gap: European substantive rules, but nationally embedded interpretation.

For innovators, legal certainty depends not only on statutory text but on predictable adjudication. If dispute resolution remains culturally and procedurally national, uncertainty persists.

Authorities face a different constraint: judicial systems are constitutionally domestic. Creating a fully supranational commercial court would require political capital that may not be available.

The result is a compromise architecture — ambitious in scope, limited in institutional redesign.

Regulatory uncertainty and market entry

High-quality operators — those with compliance budgets, institutional investors and long-term strategies — are typically more sensitive to regulatory ambiguity than opportunistic entrants.

When enforcement varies across Member States, risk modelling becomes jurisdiction-specific, capital costs increase and cross-border structuring becomes more complex. It is a fact that boards favour conservative expansion strategies.

This does not eliminate innovation. It redistributes it. Firms gravitate towards jurisdictions perceived as predictable, even if formally more regulated.

The experience of crypto-asset markets prior to MiCA illustrates this pattern: regulatory clarity, not leniency, attracts sustainable actors.

If the 28th regime does not reduce interpretative fragmentation, it may add another analytical layer without materially lowering entry uncertainty.

The 48-hour incorporation promise

Rapid incorporation is often presented as a breakthrough objective. Historically, however, 48-hour company formation was achievable in several Member States in the late 1990s using largely analogue processes.

The slowdown that followed was not technological. It was regulatory.

Anti-money laundering (AML) and counter-terrorist financing frameworks expanded significantly over the past two decades. Beneficial ownership verification, sanctions screening and enhanced due diligence requirements transformed incorporation from a formal registry act into a compliance event.

These measures serve legitimate policy goals. Yet they introduced structural friction.

If the 28th regime promises speed without redesigning compliance architecture — for example through interoperable digital identity verification or automated risk-based screening — the time constraint remains external to the registry itself.

Efficiency gains cannot arise from registry reform alone when the bottleneck lies in compliance verification.

Where current frameworks already work

It is important to acknowledge areas where European integration has succeeded.

MiCA demonstrates that harmonised licensing criteria; passporting mechanisms; and centralised supervisory coordination; can provide clarity across Member States.

Similarly, the European Digital Identity framework (eIDAS 2.0) creates the infrastructure necessary for secure cross-border verification.

The lesson is that targeted harmonisation linked to operational infrastructure produces tangible benefits. Optional corporate wrappers without supervisory or procedural integration do not necessarily achieve the same effect.

The missed digital opportunity

If the 28th regime is to differentiate itself, it should be digital by design. That means:

• machine-readable compliance standards;

• automated lifecycle reporting;

• structured governance templates;

• AI-assisted supervisory analytics with human oversight;

• interoperable beneficial ownership verification.

Many Member States struggle to implement such redesign due to institutional inertia, procurement cycles and administrative layering. A supranational regime has the opportunity to build from first principles rather than retrofitting legacy systems.

Without that technological ambition, the regime risks reproducing analogue structures in digital form.

Unintended barriers to low-risk innovation

Certain regulatory safeguards — particularly AML processes — are risk-based in theory but often applied very conservatively in practice.

Low-risk, transparent technology firms may experience:

• duplicative documentation requests;

• inconsistent interpretations across service providers;

• prolonged onboarding;

• reluctance from banks or regulated professionals.

The intent of the law is to mitigate systemic risk. The effect can be to slow legitimate entrants disproportionately.

A well-designed 28th regime would incorporate calibrated compliance pathways for demonstrably low-risk actors, using structured risk metrics rather than uniform procedural depth.

Why dialogue architecture matters more than another rulebook

Dialogue formats (sandboxes, innovation hubs, roundtables/sprints, interpretive Q&As, and consultation feedback loops) matter because they convert regulatory uncertainty into predictable pathways without suspending regulatory objectives. In practice, high-quality market entrants tend to be deterred less by strict rules than by uncertain rules—particularly where they must raise capital, obtain banking access, or design compliance controls before product-market fit.

The best evidence-based articulation of this “uncertainty → market entry friction” mechanism is found in the FCA’s early sandbox evaluation. The FCA described the sandbox as enabling firms to test innovations in a live market with safeguards and stated that one expected benefit was “enabling greater access to finance for innovators, by reducing regulatory uncertainty.”  This is the same logic that appears in EU-level experimentation initiatives: the European Blockchain Sandbox is explicitly framed as a structured regulatory dialogue that increases legal certainty, without purporting to confer authorisation or legal derogations

Regulatory sandboxes as controlled experimentation rather than “regulatory holidays”

The Joint ESAs’ 2023 report defines a regulatory sandbox as a scheme enabling firms to test innovative financial products/services/business models pursuant to a specific testing plan agreed and monitored by a dedicated function of the competent authority. Importantly, it states that sandboxes may involve legally provided discretions, but do not entail the disapplication of regulatory requirements that must be applied as a result of EU law. 

That “no disapplication of EU law” point is foundational. A well-designed sandbox reduces friction by clarifying how to comply, not by excluding compliance.

A notable 2024–2026 shift is that the EU AI Act turns “sandboxing” from an optional supervisory technique into mandatory public infrastructure: Member States must establish at least one AI regulatory sandbox by 2 August 2026, with required artifacts (written proof, exit report), reporting duties, confidentiality rules, and cross-border cooperation objectives. This is a strong blueprint for what “credible, accountable dialogue” looks like when it is institutionalised rather than improvised.

What “good written guidance” looks like in a digital-asset context

Drawing from the ESAs’ and FCA’s sandbox experience, written guidance works best when it:

• is anchored in typical product architectures (custody, staking, stablecoin reserve management, DeFi protocol governance),

• specifies which elements trigger which regulatory obligations,

• states what evidence supervisors expect to see (policies, logs, audits),

• is updated on a predictable cadence, and

• is explicitly framed as non-binding but “convergence oriented,” mirroring ESMA/EBA practice. 

A practical complement is curated access to underlying rules and related guidance. The EBA’s Interactive Single Rulebook provides a consolidated documentation tool for Level 1 texts and related RTS/ITS/guidelines/Q&As while explicitly stating it has no legal effect and that authentic texts remain in the Official Journal.  Even as “mere documentation,” tools like this reduce friction by centralising the materials firms must operationalise.

Failure is always an option

The 28th regime will fail if it remains a well-intentioned layer added to an already dense regulatory landscape. Optional harmonisation without institutional redesign does not remove fragmentation; it reorganises it. Faster incorporation without compliance recalibration does not create efficiency; it shifts bottlenecks. European substance enforced through nationally divergent procedures does not generate certainty; it redistributes risk.

Yet the underlying objective remains sound. Europe needs a framework that genuinely lowers cross-border friction for responsible innovators while preserving supervisory credibility. That requires more than a new legal form. It requires enforcement coherence, digital-first infrastructure, proportionate compliance architecture, and structured dialogue between regulators and market actors.

If the 28th regime does not integrate these elements, it will likely become another administratively elegant instrument with limited uptake. If it does, it could still evolve into the bridge it aspires to be.