As the EU’s Markets in Crypto Assets Regulation (MiCA) became fully applicable on 30 December 2024, providers of crypto asset services (CASPs) face a transformed regulatory landscape. Yet, MiCA acknowledges the reality that many companies were already operating under national regimes when it was adopted. That’s where the grandfathering clause comes into play, a crucial transitional mechanism.

What Is Grandfathering under MiCA?

Under Article 143(3) of MiCA, existing CASPs that were offering services in compliance with national laws before 30 December 2024 may continue operating for a transitional period lasting up to 18 months, until 1 July 2026, or until they are granted or denied a MiCA authorization, whichever happens first.

This regime provides breathing room for businesses to prepare for full compliance, but it is not automatic nor uniform across the EU. Member States can opt to shorten or even forgo this transitional period entirely, as long as they inform ESMA and the European Commission by 30 June 2024.

National Differences at a Glance

Member State approaches to grandfathering vary widely.

Here's a snapshot:

• Some allow the full 18-month period, like France, Malta, and Luxembourg.

• Others enforce shorter spans: 6 months in Lithuania, Latvia, Hungary, the Netherlands, Poland, and Slovenia; 12 months in Austria and Germany.

• Germany and Austria actually set a shorter cap, ending grandfathering by 31 December 2025.

Moreover, in some jurisdictions, applying for authorization by a specific deadline is required to benefit fully from the transitional window.

Limitations: Not a License to Operate Freely Across Borders

Crucially, grandfathered providers are not considered MiCA licensed CASPs. They cannot access MiCA's EU passporting, which allows licensed CASPs to operate services across member states. Cross border operations under grandfathering must rely on existing national permissions, and services are limited to jurisdictions that still apply their own transitional regime.

Furthermore, MiCA’s market abuse provisions (Title VI) and other regulations like the Transfer of Funds Regulation (TFR) apply immediately, with no grandfathering allowed.

What’s at Stake and How to Prepare

For providers still operating under national regimes, MiCA’s grandfathering is a valuable but time-limited reprieve. It is not a free pass. As compliance experts note, the grandfathering period is far from a shortcut to compliance.

To minimize disruption:

1. Identify your country’s specific grandfathering end date and any application deadlines.

2. Begin your CASP authorization preparation early, including documentation, governance, capital adequacy, AML/KYC, and risk management frameworks.

3. Engage your national competent authority proactively to clarify expectations and application timelines.

4. For cross-border services, monitor both home and host state rules, particularly as regimes end at different times.

5. Navigate overlapping frameworks: TFR, AML Directives, and MiCA requirements like whitepapers or market abuse rules, which may demand immediate compliance.

Final Word

MiCA’s grandfathering clause offers a vital transition bridge for CASPs, but it comes with an expiry date. It grants temporary relief but brings regulatory complexity, especially across jurisdictions. To survive the transition intact, CASPs must act strategically: know their national deadlines, prepare well in advance, and avoid assuming cross border flexibility without a MiCA license. In the ever evolving crypto world, there is no substitute for timely compliance.