EBA Sounds Alarm: Crypto Firms Exploiting MiCA Loopholes Pose ‘Significant’ Threat to EU

Core Insights - The European Banking Authority (EBA) has identified significant risks associated with crypto firms potentially exploiting regulatory gaps during the transitional phase of the Markets in Crypto-Assets (MiCA) regulation, which could threaten the EU's financial system [1][3] Regulatory Concerns - The EBA warns that crypto service providers authorized before MiCA's full implementation in December 2025 may engage in "jurisdiction shopping," registering in EU member states with weaker oversight [1][3] - This behavior could lead to opaque governance, inadequate risk management, and potential misuse of customer funds, resulting in "uneven regulatory standards" and systemic vulnerabilities [3][4] Recommendations for National Authorities - The EBA urges national authorities to apply consistent supervision and ensure that firms authorized during the transitional period meet equivalent prudential and governance requirements to those that will apply once MiCA is fully enforced [4][6] - It emphasizes the importance of cooperation between EU financial regulators to prevent high-risk entities from exploiting inconsistencies between jurisdictions [4] Information Sharing and Risk Management - The EBA calls on member states to share information about license approvals and revocations to help prevent regulatory arbitrage [5] - The authority highlights that money laundering and terrorist financing risks remain high in the crypto sector, with inadequate due diligence potentially allowing illicit flows to go undetected [5] Transitional Period and Compliance - Under MiCA, crypto firms must obtain authorization and comply with strict operational, reserve, and disclosure requirements, but firms registered before June 2024 may continue operating until the end of 2025 without meeting new EU-wide standards [6] - The EBA recommends intensified supervision during this window, focusing on governance structures, capital adequacy, and transaction monitoring systems [6][7] - Firms are encouraged to align with MiCA's risk management and consumer protection requirements ahead of time to avoid disruptions once the transition period ends [7]