What happened?
The European Banking Authority warned that some crypto firms may exploit regulatory gaps during the MiCA transitional period, especially those authorized before full enforcement. Regulators fear “jurisdiction shopping,” where firms register in member states with weaker oversight and use passporting to operate across the EU. The EBA says this could lead to opaque governance, weak risk controls, and increased money‑laundering and terrorist‑financing risks.
Who does this affect?
This mainly affects crypto service providers that registered under national regimes before MiCA’s full implementation, which could try to avoid stricter EU standards. It also puts pressure on national supervisors who must coordinate and step up scrutiny, and on banks and institutional investors with rising crypto exposures. Retail users and broader financial markets are at risk too, since weak oversight can lead to misuse of customer funds and cross‑border illicit flows.
Why does this matter?
If opportunistic firms evade rules, market trust in Europe’s crypto ecosystem could fall, prompting tighter crackdowns and higher compliance costs that drive volatility. Banks might face tougher capital treatment or be forced to limit exposures, while non‑MiCA‑compliant tokens could be delisted, reducing liquidity and hurting prices for certain assets. Inconsistent enforcement risks market fragmentation and regulatory arbitrage, which could create shocks that ripple through EU financial markets and investor confidence.