The European Banking Authority (EBA) has issued a report warning of potential regulatory arbitrage during the transition period of the EU's Markets in Crypto-Assets (MiCA) regulation. The EBA highlighted that some crypto service providers, approved before the regulation's full implementation, might exploit regulatory gaps by registering in member states with more lenient oversight. This could allow them to operate across the EU using passporting rights, leading to risks such as governance opacity and complex fund flows. The EBA cautioned that such practices could undermine the integrity of the EU's financial system and create vulnerabilities for money laundering and illicit fund movements. The report underscores the need for vigilant oversight to prevent these risks from materializing during the MiCA transition phase.