MiCAR’s Grandfathering Window Closes

This article looks at early implementation experience under MiCAR, including challenges and practical tools. It then examines the implications of the grandfathering transition ending, and dives into how the conversation around MiCAR 2.0 has already begun.

With MiCAR becoming applicable, a European-wide landmark regulation has met market reality

MiCAR entered into force in June 2023 and became fully applicable on 30 December 2024. It introduced a harmonised authorisation and supervision framework for crypto-asset issuers and Crypto-Asset Service Providers (CASPs) across the EU. Early implementation has revealed a mixed picture: the regulation delivers the legal clarity the industry requested, but its operational complexity has tested even well-resourced institutions. At the same time, supervisors have begun to provide tools that institutions can use to address these challenges.

Licensing overlaps: when MiCAR meets PSD2

One practical challenge has surfaced at the intersection of MiCAR and the Payment Services Directive (PSD2). Certain crypto-asset services — particularly e-money tokes (EMT) transactions — may overlap with payment service activities regulated under PSD2. The European Banking Authority (EBA) No Action Letter (NAL)¹ gave national competent authorities flexibility during the transition. That grace period has now ended.

The EBA’s opinion at the end of the NAL transition period indicates that where a CASP’s EMT-related activities qualify as payment services, MiCAR authorisation alone is not sufficient. In such cases, they must obtain a separate PSD2 authorisation, partner with an authorised payment service provider, or restructure their service offering². This dual-licensing dynamic has added operational complexity and has prompted institutions to reassess how payment and crypto‑asset services are organised within groups, and whether their operating models align with supervisory expectations.

Stablecoins under scrutiny

MiCAR’s framework for multi-issuance stablecoins has become a key proving ground for financial institutions, who need to reconcile prudential requirements with a globally competitive offer. The regulation requirements for asset-referenced tokens (ARTs) and e-money tokens (EMTs)—including reserve composition rules, redemption rights, and capital requirements—are among the most prescriptive provisions in the entire framework. These rules may restrict the global competitiveness of EU-domiciled stablecoin issuers, particularly when compared to the more flexible approach emerging in the United States under the GENIUS Act.³

Restricting global stablecoins comes with economic costs. Research by the Centre of European Policy Studies (CEPS) suggests that overly rigid requirements could push stablecoin issuance offshore, undermining the very market integrity MiCAR aims to protect. The challenge for regulators is to balance prudential safeguards against the risk of regulatory arbitrage.⁴

Practical tools are emerging to reduce implementation friction

For many products relevant to financial institutions, a central implementation challenge has been classification: determining whether an asset is in scope of the regulation at all, and if so, under which regime. Between 2023 and 2026, the European Blockchain Sandbox conducted regulatory dialogues on 20 innovative Distributed Ledger Technology (DLT) use cases across different industry sectors and Member States. While the initiative is broader than MiCAR alone, its best practices reports contain several insights that are directly useful when institutions face difficult classification questions.

Interesting findings of the third best practices report include a detailed classification flowchart for crypto-assets aligned to Article 97(1) MiCAR, a clearer distinction between “transferable securities” and “instruments of payment,” and an instructive case study on the qualification of ESG data tokens under MiCAR.⁵ The report also draws out practical considerations on issuer identification and consolidates MiCAR’s crypto-assets services (Art. 3(1)(16)) in a single table alongside their statutory definitions.⁶ More broadly, these and other insights in the report are particularly relevant for financial institutions classifying their product portfolios, as they support more consistent, well-documented and defensible classification decisions vis-à-vis supervisors.

Beyond classification, ESMA has sought to ease the transition by issuing a statement to support the smooth implementation of MiCAR data standards and reporting formats, acknowledging the operational burden on market participants and signalling a pragmatic approach to early enforcement.⁷

With the grandfathering window coming to an end, CASP dependencies face their first real stress test

Article 143(3) MiCAR introduced grandfathering provisions that allowed existing crypto-asset service providers to continue operating under their national licences during a transition period. The precise duration varied by Member State, with deadlines ranging between 12 and 18 months after MiCAR’s full applicability.⁸ After the deadline, firms providing crypto-asset services to EU clients without a MiCAR licence will be acting illegally and will be required to cease those activities.

Over the past 18 months, the grandfathering regime has largely fulfilled its role: it has prevented a cliff edge interruption of CASP services while their MiCAR applications were assessed. As part of the transition, national competent authorities have established interim registers of CASPs operating under grandfathering provisions. The formalisation of these registers has been a critical step in creating transparency about which entities are authorised to operate and under what conditions. This process also serves as the foundation for the EU-wide register that ESMA will maintain once all transition periods expire.⁹

As the transitional window closes, the discussion for financial institutions is increasingly centring on counterparty risk and business continuity. For financial institutions relying on CASPs, the end of grandfathering means navigating a transition in which CASP counterparts are either winding down or absorbing migrating clients and positions, so that every position ultimately ends up with an authorised provider or in a self‑hosted wallet. As this migration phase unfolds, institutions themselves need to keep their operating models steady: maintaining MiCAR‑aligned processes, robust AML/CFT controls and GDPR‑compliant handling of client data as part of everyday business, rather than as temporary project work.

A possible MiCAR 2.0 reform could bring five reform areas that can reshape crypto-asset regulation

Because of the current development, supervisory authorities from EU Member States are already calling for revisions. A discussion about a possible MiCAR 2.0 is emerging, driven by practical experience and evolving market dynamics. The proposed reforms address several areas where the current framework has proven either too rigid or insufficiently precise.¹⁰

The emerging consensus points to several areas where MiCAR may require updating:

• Classification clarity: The distinction between crypto-assets falling under MiCAR and those qualifying as financial instruments under MiFID II remains contested. The ESMA Guidelines’ “substance over form” approach¹⁰ has not fully resolved the ambiguity, and market participants continue to struggle with classification decisions that carry significant licensing and reporting consequences.
• Stablecoin regulation: The prescriptive requirements for ARTs and EMTs may need recalibration. While the EU remains an attractive market, the current rules could still incentivise some issuers to structure activity in more flexible non-EU jurisdictions. At the same time, the regime’s approach to multi-issuance stablecoins would benefit from a more nuanced framework that better reflects the diversity of stablecoin designs in practice.
• DeFi and non-custodial services: MiCAR was designed primarily for centralised service providers. Decentralised finance (DeFi) protocols and non-custodial services fall largely outside its scope. As these services grow in scale and systemic relevance, regulators will need to decide whether to extend MiCAR’s perimeter or develop separate rules.
• Interoperability with third-country regimes: The relationship between MiCAR and emerging frameworks in the United States (GENIUS Act), the United Kingdom, and Asia-Pacific jurisdictions will shape the global competitive landscape. Equivalence determinations and mutual recognition arrangements are not yet addressed in MiCAR and may become essential.
• Operational resilience: While DORA provides the broader framework for ICT risk management, the specific intersection with crypto-asset operations, including smart contract auditing, node security, and cryptographic key management, may warrant dedicated provisions within MiCAR itself.

The European Commission is mandated to review MiCAR by June 2027,¹² producing a report on its application that may include legislative proposals for amendments. In practice, the review process has already begun informally, with ESMA, the EBA, and national competent authorities feeding their supervisory experiences into early consultations.

Financials Institutions should act now on positioning their businesses for what comes next

MiCAR’s first year has proven that regulation, however imperfect, creates the conditions for institutional trust. The direction of travel is unambiguous: 80% of European financial institutions already acknowledge crypto’s growing importance, even if only 19% currently offer crypto-asset services.¹³

The grandfathering period is closing. Supervisory discussions are already laying the groundwork for a MiCAR 2.0. For market participants willing to look past the compliance burden, this next phase presents a distinct strategic opportunity.

Financial institutions should not wait for MiCAR 2.0 to act. The regulatory direction is clear: greater harmonisation, stricter enforcement, and broader scope. Institutions that build flexible compliance architectures now will be better positioned to absorb future regulatory changes without disruptive retrofitting.

Those that wait for final rules before acting will spend the next cycle catching up. Those that engage in the reform process — through regulatory sandboxes, industry consultations, and early alignment with emerging standards — will shape the market they compete in.

Literature

1. EBA. 2025. EBA publishes No Action letter on the interplay between Payment Services Directive (PSD2/3) and Markets in Crypto-Assets Regulation (MiCA) (EBA/OP/2025/08). [Online]. 10 June 2025. [Accessed 16 June 2026]. Available from: EBA publishes No Action letter on the interplay between Payment Services Directive (PSD2/3) and Markets in Crypto-Assets Regulation (MiCA) | European Banking Authority ↩︎
2. EBA. 2026. The EBA advises national authorities on actions to take at the end of the transition period under its No-Action Letter on the interplay between PSD2 and MiCA (EBA/OP/2026/01). [Online]. 12 February 2026. [Accessed 16 June 2026]. Available from: The EBA advises national authorities on actions to take at the end of the transition period under its No-Action Letter on the interplay between PSD2 and MiCA | European Banking Authority.
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3. CEPS. 2025. Multi-issuance stablecoins and MiCA’s first real credibility test. [Online]. 11 September 2025. [Accessed 16 June 2026]. Available from: Multi-issuance stablecoins and MiCA’s first real credibility test – CEPS ↩︎
4. CEPS. 2026. The economic costs of restricting global stablecoins – and how to mitigate the risks. [Online]. 02 February 2026. [Accessed 16 June 2026]. Available from: The economic costs of restricting global stablecoins – and how to mitigate the risks – CEPS ↩︎
5. EU Blockchain Observatory and Forum. 2026. 3rd Cohort Best Practices Report. Chapters 17(pp.152-154), 19 (p.171). [Online]. 11 February 2026. [Accessed 16 June 2026]. Available from: 3rd Cohort Best Practices Report | EU Blockchain Observatory and Forum ↩︎
6. EU Blockchain Observatory and Forum. 2026. 3rd Cohort Best Practices Report. Chapter 19. [Online]. 11 February 2026. [Accessed 16 June 2026]. Available from: 3rd Cohort Best Practices Report | EU Blockchain Observatory and Forum ↩︎
7. ESMA. 2025. ESMA75-1303207761-6284: Statement to support the smooth implementation of MiCA data standards and format requirements. [Online]. 28 November 2025. [Accessed from 16 June 2026]. Available from: Statement to support the smooth implementation of MiCA standards and format ↩︎
8. ESMA. 2024. List of grandfathering periods decided by Member States under Article 143 of Regulation (EU) 2023/1114 Markets in Crypto-Assets Regulation (MiCA). [Online]. 17 December 2024. [Accessed 16 June 2026]. Available from: List_of_MiCA_grandfathering_periods_art._143_3.pdf ↩︎
9. ESMA. n.d. Markets in Crypto-Assets Regulation (MiCA) – Interim MiCA Register. [Online]. n.d. [Accessed 16 June 2026]. Available from: Markets in Crypto-Assets Regulation (MiCA) ↩︎
10. Bird & Bird. 2025. Aufsichtsbehörden fordern MiCAR-Reform. [Online]. 09 October 2025. [Accessed 16 June 2026]. Available from: Aufsichtsbehörden fordern MiCAR-Reform – Bird & Bird ↩︎
11. ESMA. 2024. Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments. [Online]. 17 December 2024. [Accessed 16 June 2026]. Available from: ESMA75453128700-1323 Final Report on the Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments ↩︎
12. Official Journal of the European Union. 2023. Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA). Article 142 Report on latest develoments in crypto-assets. [Online]. 09 June 2026. [Accessed 16 June 2026]. Available from: Regulation (EU) 2023/ of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 ↩︎
13. FinTechmagazine. 2025. Bitpanda: European Crypto Adoption Outpacing Bank Readiness. [Online]. 28 March 2025. [Accessed 16 June 2026]. Available from: Bitpanda: European Crypto Adoption Outpacing Bank Readiness | FinTech Magazine ↩︎