The European Union is experiencing a sweeping regulatory transformation in 2025, impacting every aspect of financial services compliance. From landmark crypto legislation and AI oversight to digital resilience and ESG transparency, the pace and scale of change are without precedent. For Governance, Risk, and Compliance (GRC) professionals, keeping up is not enough—anticipation and strategic alignment are essential.

This article updates our January 2025 blogpost, incorporating key developments that have occurred in the first quarter of the year and reflecting the most accurate picture of the regulatory landscape today.

I. MiCA: The Crypto Framework in Motion

Regulation Overview: The Markets in Crypto-Assets Regulation (MiCA) came into effect on 30 December 2024, and transitional provisions now define the operational reality for Crypto-Asset Service Providers (CASPs).

Key Update (Q1 2025): Under Article 143(3), CASPs operating before MiCA’s effective date may continue until 1 July 2026 or until they receive or are denied authorization under Article 63. To benefit, firms must submit detailed activity disclosures to their national competent authority by 10 January 2025.

Cross-Border Impact: MiCA introduces significant restrictions for non-EU CASPs. Firms based outside the EU are not permitted to offer crypto-asset services within the Union unless they establish an authorized EU entity or are covered by an equivalence decision—an option that remains politically uncertain and procedurally slow. This creates a critical compliance barrier for firms operating across jurisdictions and increases pressure to localize operations within the EU single market.

GRC Focus:

• Maintain continuity by submitting documentation on time.

• Implement ESMA-aligned crypto asset classification.

• Prepare for full compliance by mid-2026.

• Assess cross-border licensing strategies and consider establishing an EU-based legal entity if applicable.

Regulation Overview: The Markets in Crypto-Assets Regulation (MiCA) came into effect on 30 December 2024, and transitional provisions now define the operational reality for Crypto-Asset Service Providers (CASPs).

Key Update (Q1 2025): Under Article 143(3), CASPs operating before MiCA’s effective date may continue until 1 July 2026 or until they receive or are denied authorization under Article 63. To benefit, firms must submit detailed activity disclosures to their national competent authority by 10 January 2025.

GRC Focus:

• Maintain continuity by submitting documentation on time.

• Implement ESMA-aligned crypto asset classification.

• Prepare for full compliance by mid-2026.

II. DORA: Operational Resilience Goes Live

Status: The Digital Operational Resilience Act (DORA) took effect on 17 January 2025.

New Requirement: Firms must submit a register of ICT third-party providers to national competent authorities by 4 April 2025.

Interaction with National Frameworks: While DORA is directly applicable across the EU, it builds upon and in some cases supersedes national ICT risk management regimes. For instance, it harmonizes incident classification and reporting timelines which previously varied among member states. National competent authorities may still issue guidance, but supervisory expectations are now anchored to the standardized requirements under DORA, aligning oversight across borders and sectors.

GRC Focus:

• Develop or refine an ICT risk management framework in line with DORA.

• Implement SIEM/SOAR systems for real-time incident monitoring.

• Update contracts with critical third-party providers to meet resilience and oversight standards.

• Review legacy compliance practices to identify overlap or conflict with new DORA obligations.

Status: The Digital Operational Resilience Act (DORA) took effect on 17 January 2025.

New Requirement: Firms must submit a register of ICT third-party providers to national competent authorities by 4 April 2025.

GRC Focus:

• Develop or refine an ICT risk management framework.

• Implement SIEM/SOAR systems for real-time incident monitoring.

• Update contracts with critical third-party providers.

III. EU AI Act: Phased Compliance Timeline

Scope: The EU AI Act regulates artificial intelligence based on use-case risk categories.

2025 Timeline:

• February: Prohibited AI practices now banned.

• August: General-purpose AI system rules take effect.

2026 Preview: All remaining AI Act provisions apply by August 2026.

Examples of High-Risk Systems: High-risk AI applications in financial services include:

• Credit scoring systems used by banks to assess consumer creditworthiness

• AI-driven fraud detection platforms analyzing transaction behavior

• Algorithmic trading systems that autonomously execute trades based on market data

• Robo-advisory tools providing investment recommendations

GRC Focus:

• Conduct a full inventory of AI use cases.

• Classify systems under the Act’s risk framework.

• Prepare high-risk systems for conformity assessments, including documentation, bias mitigation, and explainability mechanisms.

Scope: The EU AI Act regulates artificial intelligence based on use-case risk categories.

2025 Timeline:

• February: Prohibited AI practices now banned.

• August: General-purpose AI system rules take effect.

2026 Preview: All remaining AI Act provisions apply by August 2026.

GRC Focus:

• Conduct a full inventory of AI use cases.

• Classify systems under the Act’s risk framework.

• Prepare high-risk systems for conformity assessments.


IV. ESG Regulations: A Tectonic Shift in Disclosure Standards


A. EBA Guidelines on ESG Risk Management

Effective Dates:

• January 2026 (large institutions)

• January 2027 (small and non-complex institutions)

Requirements:

• ESG materiality assessments

• Transition planning and risk integration


B. Regulation on ESG Rating Providers (EU 2024/3005)

Effective: 2 July 2026

Mandates:

• ESMA oversight of ESG rating firms

• Disclosure of rating methodologies and sources


C. Anticipated “Omnibus” Regulation

Expected later in 2025 to integrate CSRD, CSDDD, and Taxonomy reporting.

Comparison with Global Standards: Unlike the EU’s comprehensive and mandatory ESG disclosure framework, the United States still follows a more fragmented and principles-based approach, with the SEC’s climate disclosure rule currently stayed due to legal challenges. In the UK, ESG regulation is advancing through the FCA and PRA, but with less prescriptive requirements than the EU’s SFDR and CSRD. Notably, EU rules require third-party assurance and detailed taxonomy alignment—demands not yet mirrored by most non-EU regimes.

GRC Focus:

• Prepare ESG reporting systems for assurance.

• Align internal risk and sustainability teams.

• Audit ESG product marketing for greenwashing risk.

A. EBA Guidelines on ESG Risk Management

Effective Dates:

• January 2026 (large institutions)

• January 2027 (small and non-complex institutions)

Requirements:

• ESG materiality assessments

• Transition planning and risk integration

B. Regulation on ESG Rating Providers (EU 2024/3005)

Effective: 2 July 2026

Mandates:

• ESMA oversight of ESG rating firms

• Disclosure of rating methodologies and sources

C. Anticipated “Omnibus” Regulation

Expected later in 2025 to integrate CSRD, CSDDD, and Taxonomy reporting.

GRC Focus:

• Prepare ESG reporting systems for assurance.

• Align internal risk and sustainability teams.

• Audit ESG product marketing for greenwashing risk.

V. AML/CFT: Harmonization and Heightened Scrutiny

Development: The new Anti-Money Laundering Authority (AMLA), headquartered in Frankfurt, will supervise high-risk entities directly.

Structural Impact: AMLA represents a significant shift in supervisory responsibilities within the EU. While national Financial Intelligence Units (FIUs) and supervisory authorities will continue to play a role, AMLA will centralize oversight for the most exposed institutions, standardize supervisory practices, and facilitate cross-border information exchange. This centralization aims to eliminate regulatory arbitrage and ensure consistency in enforcement across member states. AMLA will also coordinate national supervisors and issue binding decisions in cases of disagreement.

GRC Focus:

• Prepare for harmonized AML/CFT supervision under a central EU authority.

• Strengthen transaction monitoring and sanctions screening frameworks to meet heightened expectations.

• Ensure systems provide real-time access to accurate and up-to-date beneficial ownership data.

Development: The new Anti-Money Laundering Authority (AMLA), headquartered in Frankfurt, will supervise high-risk entities directly.

GRC Focus:

• Prepare for harmonized AML/CFT supervision.

• Strengthen transaction monitoring and sanctions screening.

• Maintain real-time access to beneficial ownership data.

VI. Open Finance and Payments: PSD3 on the Horizon

Overview: Payment Services Directive 3 (PSD3) is expected in 2025 to enhance security, consent, and access protocols.

GRC Focus:

• Prepare APIs for broader data sharing.

• Coordinate compliance with GDPR.

• Enhance user authentication and consent management.

VII. CRR III / CRD VI: Basel III Finalization

Status: Provisions under CRR III/CRD VI became effective on 1 January 2025.

Key Features:

• Output floor on internal models (72.5%)

• Operational risk recalibration

• Integration of ESG risk into capital planning

GRC Focus:

• Recalibrate internal risk models.

• Conduct impact assessments on RWAs.

• Align ESG risk data with ICAAP disclosures.

A New Compliance Paradigm

2025 is a defining year for regulatory transformation in the EU. GRC professionals must manage parallel implementation timelines across MiCA, DORA, the AI Act, ESG frameworks, and capital adequacy reforms. By embedding regulatory intelligence, leveraging RegTech, and aligning cross-functional teams, compliance becomes not just a defensive function—but a strategic driver of trust and resilience. Find here are all our Executive Training Opportunities designed to keep you ahead of the latest developments in Financial Regulation.

In this complex environment, the most prepared institutions will not only survive—they will lead.