EBA Flags Crypto Firms Attempting to Sidestep EU Regulations Amid MiCA Transition

The European Banking Authority (EBA) has published a report highlighting attempts within the crypto industry to circumvent newly implemented regulations, including the Markets in Crypto-Assets (MiCA) framework and the EU’s strengthened anti-money laundering and counter-terrorism financing (AML/CFT) rules. Fully enacted in late 2024, MiCA established a harmonized regime for crypto asset providers across the 27-member bloc for the first time.

No specific firms were named in the EBA statement, yet the regulator cautioned that such circumvention efforts could persist, carrying “substantial risks for the functioning of the EU’s financial system.” Among the key concerns outlined in the report is the practice of “forum shopping,” where companies seek regulatory approval in jurisdictions perceived as having less stringent oversight in order to operate legally in other EU countries—a mechanism often referred to as “passporting.”

According to the EBA, prior to MiCA’s adoption, one unnamed entity submitted registration and licensing applications in multiple EU states within a short period. The firm reportedly withdrew from jurisdictions where authorities rigorously examined its application or posed challenges, and continued operations in countries where scrutiny was minimal or absent. The report noted, “In practice, entities with weak AML/CFT controls have already entered and are operating in the EU market by selecting jurisdictions with lighter supervisory practices or previously lower market entry requirements.”

The regulator also highlighted risks associated with the MiCA transition period, which runs until July 1, 2026, allowing firms additional time to secure a license or be classified as non-compliant. In its report, the EBA stated, “emerging evidence suggests that there may be a risk that entities which were previously licensed in a Member State and have not met the authorisation conditions under MiCA but are appealing their case may continue to operate in the EU in the interim time.”

Dr. Hendrik Müller-Lankow, a lawyer at the German crypto law firm Kronsteyn, confirmed that, based on his professional experience, supervisory arbitrage and shopping are indeed occurring across the EU. He emphasized that this is a reality regulators must acknowledge if they aim to establish a single market while retaining some level of national supervisory authority. “It is well known that people—and thus also authorities—in different Member States have different mentalities when applying laws,” he said.

Müller-Lankow suggested that the EU could mitigate these issues by centralizing both legislation and supervisory authorities, noting that much progress in this direction is already underway and that authorities are actively seeking to expand their powers. He also warned that some crypto firms may establish themselves in the EU without transparent governance or clear beneficial ownership, complicating accountability.

The EBA report underlined that opaque corporate structures increase the risk of illicit activity. It cited a virtual asset service provider (VASP) that applied for licenses in several EU jurisdictions and was found by one authority to “be jointly run by more than 20 distinct entities that were largely established outside the EU and outside regulatory oversight.” The EBA warned that such arrangements can facilitate the misuse of front or shell companies, explaining that “entities that lack real economic activity can serve as drivers to channel illicit funds under the guise of legitimate transactions.”

Overall, the report illustrates the ongoing challenges the EU faces in enforcing a unified crypto regulatory framework. While MiCA aims to provide clarity and stability for the market, uncertainties and opaque corporate arrangements continue to present hurdles. Regulators are under growing pressure to intensify oversight, improve cooperation among member states, and prevent digital tokens from being used for illicit purposes, protect investors, and preserve the integrity of the EU financial system. With the MiCA transition phase extending into mid-2026, the coming months will be pivotal in determining whether the framework can fully deliver on its promise of a harmonized and secure crypto market.

By fLEXI tEAM