Here is my response:
In 1999 I was not in education but I was a parent with students who were above grade level expectations. It was the Kindergarten teacher of my oldest who suspected her acting out in class was because she already knew how to read and write and was bored during those lessons. We lived in Arizona at the time and she suggested a Charter School for my daughter. My daughter had to go through testing during that summer before her first grade year to determine her placement. As a first grader she was changing classes throughout the day and working through levels (but never "grade" levels). She was promoted twice in her reading classes during the school year and then promoted (later demoted back) in her math class. She never saw herself as a "first grader" but she could say "I'm on level C for math and Level J for reading". She knew if she wanted to advance, she had to put in the work to do that and if she slacked off in the next level, that she could be sent back a level.
When we moved to NH in the middle of her second grade year, there was no grade level on her transcript so the school here had to call Arizona. Arizona told her that at their lowest level she would be in third grade. NH decided that she was too young to be in the third grade, so they put her in the second grade. The acting out began again. I asked them to promote her up so she would be challenged and assured them that if they did, the acting out would disappear. The school board did not agree with me and she has resented it ever since. Even now as she is getting ready to graduate with 7 more credits than our high school requires, she says "I could be in college right now".
So I agree, from experiencing it as a parent, and watching my own students, that grade level expectations sort of puts a kink in competency based learning. Students can be promoted (or demoted) based on real-time performance throughout the school year.