Is 'Grandfathering' a Loophole in Crypto Regulation? The European Union's (EU) Markets in Crypto-Assets Regulation (MiCA), a regulatory framework for the cryptocurrency market, garnered attention as the world's first unified crypto regulation. Its aim was to foster a new digital financial order and bring stability to the volatile crypto market. However, as these ambitious goals face various challenges during implementation, questions are being raised about MiCA's effectiveness. Can MiCA truly gain trust and fulfill its role in crypto regulation? Currently, MiCA is being evaluated as failing to meet initial expectations due to implementation delays and 'grandfathering' provisions during its enactment process. MiCA, which came into effect in June 2023, postponed the application of stablecoin regulations to June 30, 2024, and regulations for general crypto-asset service providers to December 30, 2024. However, the 18-month 'grandfathering' period, which constitutes a transitional phase for regulatory change, effectively delayed the full application of regulations across the EU until July 1, 2026. During this process, the issue of 'regulatory arbitrage' has emerged, where companies seeking to cut costs by not complying with regulations move to jurisdictions with looser rules. These actions by companies attempting to exploit the EU's meticulous regulatory environment raise concerns about eroding market trust. Regulatory arbitrage literally refers to the practice of operating businesses in countries or regions with lower regulatory standards to reduce compliance costs and thereby pursue greater profits. Even within the EU, there are some differences in the strictness and enforcement intensity of regulations across countries, leading to observed attempts by companies to exploit this before MiCA's introduction or during its transitional period. The European Banking Authority (EBA) views this situation with great seriousness. In a report published last October, they warned about this issue, pointing to cases where certain crypto-asset service providers applied for licenses in 'loose jurisdictions' with inadequate AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) requirements, thereby achieving cost savings and regulatory advantages. The EBA highlighted these risks in its report by presenting a specific case of a crypto-asset provider whose MiCA application was rejected due to severe AML/CFT deficiencies. For instance, if a particular crypto company obtains a license in a relatively less stringent jurisdiction to circumvent strict EU regulations, or uses this to evade obligations, they gain an advantageous position over competitors who have already invested significant resources to comply with regulations. Such situations threaten the credibility of existing regulatory structures and further create unnecessary competitive imbalances in the market. Unapproved companies operating at lower costs gain a competitive edge over those that comply with regulations. Consequently, MiCA's goals of market integration and stability appear difficult to achieve for the time being. Regulatory Arbitrage Dictates Corporate Competitiveness Furthermore, regulatory gaps could potentially lead to risks where consumers are not adequately protected. MiCA clearly aims to establish a foundation for crypto consumers to trade securely. However, if regulatory arbitrage persists, consumers might be exposed to risky services or forced to transact on unreliable platforms due to regulatory gaps. This is not merely an issue for the financial industry but carries the potential for direct harm that consumers can experience. This issue has become particularly prominent in the regulatory process concerning Electronic Money Tokens (EMTs). As the temporary allowance period for processing certain tokens treated as payment services ends on March 2, 2026, the EBA issued new guidelines to national regulatory authorities. The EBA specified the conditions under which EMT services can continue to be provided after this temporary period expires and recommended that companies failing to meet these conditions be required to cease providing services. This measure was intended to provide clear guidelines for crypto companies handling EMTs ahead of MiCA's full implementation. These efforts to refine regulations are an extension of the 'No-Action Letter' published by the EBA last June. In June 2025, the EBA issued this letter to clarify how PSD2 (Revised Payment Services Directive) and MiCA interact for crypto companies handling EMTs. While the letter postponed the need for a second authorization under PSD2 and proposed a simplified authorization process, it resulted in over 100 Crypto-Asset Service Providers (CASPs) submitting informal or formal authorization applications to national regulatory authorities. This demonstrates the complexity of regulation and the efforts of many companies to comply, while also indicating that transitional confusion pers
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