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European Banking Authority Highlights Regulatory Challenges in Crypto Sector

13/10 08:13

According to PANews, the European Banking Authority has released a new report focusing on how the cryptocurrency industry is attempting to circumvent new regulations such as the Markets in Crypto-Assets (MiCA) and its expanded anti-money laundering and counter-terrorism financing legislative framework. MiCA, which came into effect at the end of 2024, establishes unified regulatory rules for crypto asset service providers across the 27-member economic bloc. While the report does not specify particular companies, it notes that some entities may continue to evade regulatory requirements, potentially impacting the integrity of the EU's financial system. One significant risk identified is 'regulatory arbitrage,' where companies obtain regulatory approval in countries with more lenient oversight to operate in other EU regions. Before MiCA's implementation, an unnamed entity applied for registration in multiple countries and later withdrew from jurisdictions under scrutiny to operate in less challenged nations. Although MiCA became fully effective last year, a transition window is set until July 1, 2026, allowing entities that have appealed against authorization conditions to continue operations during this period. Additionally, some cryptocurrency companies may lack clear identification of actual beneficiaries and governance structures. One virtual asset service provider (VASP) was found to be operated by over 20 unregulated entities outside the EU, raising concerns about transparency. Such opaque structures could lead to the misuse of front companies as channels for money laundering.

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