Each micro-instruction includes a register move between a source and destination register. The micro-instruction can specify the 5-bit code directly, or use the M and N registers for indirection. This way, microcode doesn't need to know which registers an instruction specifies.
This system is a bit complicated, but gives the 8086 a lot of flexibility for specifying which registers to use.
For more information, see my blog post https://www.righto.com/2023/03/8086-register-codes.html