- The European Banking Authority (EBA) released a report on crypto firms attempting to avoid new EU regulations.
- The EBA warned about risks, including “forum shopping,” where companies seek approval in countries with lighter rules.
- Some crypto providers bypassed scrutiny by applying in multiple countries and operating only where their applications went unchallenged.
- The report highlighted concerns about unclear ownership structures that could allow illicit fund flows.
- Experts suggest more centralized EU oversight could address ongoing regulatory weaknesses.
The European Banking Authority recently published a report outlining attempts by crypto asset firms to sidestep new EU regulations, specifically the Markets in Crypto-Assets Regulation (MiCA) and an expanded anti-money laundering and counter-terrorism financing (AML/CFT) framework. MiCA took full effect across the European Union in late 2024, establishing unified rules for 27 member states.
According to the EBA, some crypto firms are trying to circumvent these regulations by engaging in “forum shopping,” where companies seek regulatory approval in jurisdictions perceived as less strict, then operate across the EU using these credentials. The report found that before MiCA’s adoption, at least one unnamed crypto provider applied for licenses in several countries, withdrew applications where regulators raised concerns, and started operations in a nation where authorities accepted the firm’s registration without challenge.
The EBA stated in its report that, “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.” Even though MiCA is now active, companies have until July 1, 2026, to comply fully, due to a transition period. The EBA cautioned that entities who fail to meet new authorization conditions but appeal their cases may continue to operate during this window.
The report also addressed the issue of crypto companies establishing operations without clear beneficial ownership or transparent governance structures. In one case, a virtual asset service provider (VASP) was found by regulators to be controlled by more than 20 entities set up outside the EU, making oversight difficult and raising the possibility of illicit money transfers. The EBA noted, “Entities without genuine economic activity can act as vehicles to channel illicit funds under the guise of legitimate transactions.”
Dr. Hendrik Müller-Lankow, a lawyer at German crypto law firm Kronsteyn, stated that “supervisory arbitrage and supervisory shopping are in fact occurring throughout the EU.” He suggested that more centralized supervision could reduce these risks, and noted that the EU is already working to strengthen its regulatory powers.
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