The End of Grandfathering Under MiCAR

What is this about?

The Market in Crypto-Asset Regulation (MiCAR) establishes uniform requirements across Europe for crypto-asset service providers (CASPs). These providers require authorization from a national supervisory authority (NCA) to provide their services in compliance with the law. As the following chart shows, by the end of June 2026, a significant number of market participants had already received an authorization under MiCAR.

Prior to MiCAR’s entry into force on December 30, 2024, some member states already had individual licensing requirements in place for the provision of certain services related to crypto-assets. In Germany, for example, crypto custody services have been a financial service requiring a license under the German Banking Act (KWG) since 2020. Crypto custodians therefore had to undergo a licensing procedure with the Federal Financial Supervisory Authority (Bafin) to be authorized as CASPs under national law.

Comparable licensing requirements also existed in other Member States, not least to ensure compliance with anti-money laundering regulations by Virtual Asset Service Providers (VASPs).

MiCAR has taken into account the fact that there are CASPs that provided their services prior to December 30, 2024, in accordance with applicable national law, by establishing transitional measures. Accordingly, a crypto-asset service could initially continue to be provided even after MiCAR’s entry into force and without holding a corresponding MiCAR license. This is commonly referred to as “grandfathering.”

Which deadlines apply to grandfathering under MiCAR?

MiCAR and Member State regulations set specific deadlines for this transition period.

Article 143(3) of MiCAR clarifies that CASPs that provided their services in accordance with applicable law before 30 December 2024, may continue to do so until 1 July 2026 or until they are granted or refused an authorization pursuant to Article 63 MiCAR, whichever is sooner.

Member States were free to choose not to make use of the transition period provided for by MiCAR or to shorten its duration. The European Securities and Markets Authority (ESMA) maintains an overview of Member State deadlines.¹

In any case, the grandfathering period will end EU-wide on July 1, 2026.

What are the consequences of this?

In order to continue actively offering crypto-asset services in the EU from July 1, 2026, CASPs must therefore obtain authorization under MiCAR.

In light of the expiration of the grandfathering period on July 1, 2026, ESMA expects unauthorized CASPs to take immediate steps to wind down their EU activities in an orderly manner, while also safeguarding clients’ interests and mitigating risks to market integrity.²

Article 74 MiCAR provides a general framework for an orderly wind-down, which is based on applicable national law.

To date, NCAs appear to have required market participants to take varying measures. In some cases, a suspension of new client business was required. In addition, a complete winding down of existing client business was sometimes demanded. Depending on when the client relationship was established, however, the general principle of grandfathering may apply in certain circumstances. Furthermore, it must always be taken into account that clients must not suffer undue economic harm and that market integrity must be preserved. This argues, for example, against a forced liquidation of the positions of inactive existing clients as part of a winding-down process.

In a public statement dated June 23, 2026, ESMA recently clarified the requirements for unlicensed CASPs.³

According to these requirements, unlicensed CASPs must, in particular:

• immediately stop onboarding new EU clients, refrain from opening new client relationships or accounts, and cease marketing activities and solicitation.
• limit the provision of services to actions necessary to sell or transfer crypto-assets, reallocate assets, or close positions. Custody of clients’ crypto-assets can only continue for the period strictly necessary to complete an orderly exit.
• communicate clearly, promptly and repeatedly with clients (retail and institutional) about the measures taken to safeguard their assets and the wind-down plans so that clients know the timeline to dispose of, transfer, reallocate or close their positions. CASPs’ communications should include a deadline by which any residual positions would be closed automatically and information about client protection requirements.

ESMA further notes that winding-down measures should be implemented should be implemented in compliance with all relevant EU or national conduct laws and AML/CFT obligations. In particular, CASPs should maintain effective AML/CFT controls throughout the wind-down process, including customer due diligence measures, transaction monitoring, screening against restrictive measures and sanctions lists, suspicious transaction and activity reporting, record-keeping requirements, and compliance with applicable transfer of funds and crypto-asset transfer traceability obligations. ESMA expects unauthorized CASPs to act diligently and with due care to protect clients.⁴

In an earlier statement, ESMA also emphasized that NCAs should treat “last-minute” applications for authorization under MiCAR with considerable caution and assess their compliance with MiCAR upholding the same standard as for any other, including if that implies the applicant CASP must wind-down its crypto-asset services in (a) given Member State(s) or the EU more widely while the application is assessed.⁵

Why is this important?

The NCAs will intensify their cooperation in identifying unauthorized crypto-asset services and taking action against unlicensed CASPs.⁶  In this context, critical reviews are also likely to be conducted of market participants from third countries who (allegedly) base their service offerings in the EU on the principle of reverse solicitation to provide services.

Unlicensed CASPs and individuals acting on their behalf face significant risks of sanctions: For example, under German law, the unauthorized provision of crypto-asset services constitutes an administrative offense that can be punished with a fine substantial enough to be a significant financial burden for the CASP. Furthermore, natural persons acting on behalf of the CASP may even be subject to criminal prosecution.

Finally, Bafin can, for example, publish a warning on its website about a CASP, which offers crypto-asset services without authorization (so-called “naming and shaming”). Such a warning can, in turn, prevent the CASP from obtaining a MiCAR license in another Member State.

White-Label Solutions to Maintain Business Operations

White-label solutions are one way to maintain business operations until a company obtains its own MiCAR license.

Unlike the Markets in Financial Instruments Directive (MiFID II) or its national implementing legislation, MiCAR does not provide for an explicit tied agent model, which allows for considerable flexibility in structuring white-label solutions.

In a white-label solution, the CASP that is not (yet) authorized generally cooperates with CASPs that already hold an authorization and, ideally, have already been passported within the EU.

This allows the brand of the (yet) unlicensed CASP to maintain a presence in the European Economic Area and continue business operations until it obtains its own MiCAR license.

If, for example, end customers are to be offered trading in crypto-assets and their custody via the front end of the (as yet) unlicensed CASP, the following crypto-asset services requiring authorization may be relevant:

• Execution of orders for crypto-assets on behalf of clients;
• Providing custody and administration of crypto-assets on behalf of clients;
• Providing transfer services for crypto-assets on behalf of clients;
  

As can be seen in the chart below, the aforementioned crypto-asset services are disproportionately common in the selected jurisdictions.

Structuring a white-label model requires a thorough legal analysis, in which civil law and regulatory legal issues in particular must be coordinated between the cooperating parties. Key aspects to be addressed include the structuring of contractual relationships — including the end-customer terms and conditions — ensuring AML/CFT compliance, and obtaining a legal assessment on the planned overall model.

The following diagram clearly illustrates the flow of information and the relationships between the parties potentially involved.

The goal here should be to ensure that, once a CASP has obtained its own license, it can begin providing services to its existing customer base as smoothly as possible.

Who else might be interested in a white-label solution?

A white-label solution is specifically suited not only for CASPs that previously provided their services in accordance with applicable member state law prior to the entry into force of MiCAR, but also for all those who are currently undergoing a MiCAR authorization process or planning to submit an application and, at the same time, wish to maintain an active presence in the European market.

What’s next?

The date of July 1, 2026, has served as a wake-up call for the European crypto market. Nevertheless, there is no reason for either customers or CASPs to act rashly. It is reasonable to assume that ESMA and the NCAs will further clarify the requirements for orderly wind-down. In our view, the regulatory authorities are certainly open to a dialogue to discuss white-label solutions aimed at protecting customer interests and safeguarding market integrity.

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¹ List_of_MiCA_Grandfathering_Periods_Art._143_3.pdf

² ESMA75-113276571-1710_Public_Statement_MiCA_transitional_period_ends.pdf

³ ESMA75-113276571-1710_Public_Statement_MiCA_transitional_period_ends.pdf

⁴ ESMA75-113276571-1710_Public_Statement_MiCA_transitional_period_ends.pdf

⁵ See the corresponding ESMA statement: ESMA75-113276571-1631_Statement_on_end_of_MiCA_transitional_periods.pdf

⁶ ESMA75-113276571-1631_Statement_on_end_of_MiCA_transitional_periods.pdf