EBA Warns of "Regulatory Arbitrage" During MiCA Transition Period
Date: 2025-10-13 Author: Henry Casey Categories: BUSINESS
The European Banking Authority (EBA) has released a report highlighting the ongoing threats to the cryptocurrency market during the adaptation period to the new MiCA (Markets in Crypto-Assets) regulation. The organization notes that before MiCA fully enters into force, some companies are exploiting regulatory discrepancies between EU countries, which could undermine trust in the future supervisory system.
According to the report, certain crypto services licensed in countries with less stringent regulations are using "jurisdiction shopping"—choosing a jurisdiction with the most lenient oversight. By obtaining a license in one of these countries, companies can provide services throughout the European Union thanks to the passporting mechanism. This complicates oversight, especially when supervisory authorities in one country are forced to monitor the activities of companies operating throughout the EU.
The EBA warns that this situation creates several key risks. First, an opaque corporate governance structure could allow companies to conceal their true owners and managers. Second, the use of different national regulatory regimes facilitates the movement of capital between jurisdictions, increasing the risk of money laundering (AML) and terrorist financing (CTF). Third, national regulators are overwhelmed by the burden of supervising companies whose actual activities fall outside their jurisdiction.
To minimize these threats, the EBA calls on national supervisory authorities to cooperate more closely, exchange information, and conduct joint inspections. The Authority recommends enhanced due diligence procedures for crypto services, especially during the transition period. This approach, according to the EBA, should be "proportionate but proactive."
Despite efforts to create a unified and transparent crypto market, the European Union faces the problem of inconsistent regulations. If Member States fail to develop uniform standards, this will create loopholes for circumvention and undermine the effectiveness of MiCA.
The report emphasizes that MiCA's goal is to create a stable legal framework for the crypto industry that promotes investor protection and the sustainable development of digital assets. However, without the active participation of national regulators and a uniform approach at the EU level, the risks of abuse will remain.
The EBA warns that the transition period will be a crucial stage to build trust in the new regulation and prevent "regulatory arbitrage" from undermining the foundations of the future European crypto market.
