Quick Breakdown:
- France is pushing back on MiCA passporting and its “one license for all,” fearing regulatory shopping and weaker oversight.
- Malta’s lighter-touch approvals highlight loopholes that could undermine MiCA regulation.
- France, Italy, and Austria want ESMA to centralize supervision and strengthen EU crypto regulation.
- Investor confidence hangs in the balance—uneven enforcement could damage Europe’s credibility as a global crypto hub.
Why France is skeptical about MiCA’s “one license for all” framework
Under the MiCA regulation crypto companies can obtain a license in one EU country and use it to operate across the entire 27-nation bloc. The aim is to cut red tape, harmonize rules, and build a truly unified European market. Yet France’s securities regulator, the AMF, is not convinced. Its main worry is “regulatory shopping,” where firms seek out countries with softer rules, secure a license there, and then freely enter stricter markets like France without facing the same level of scrutiny.
The issue is not just about initial approvals but about ongoing supervision, differences in how member states handle audits, anti-money laundering standards, or cybersecurity could leave investors unevenly protected. In response, France has even floated the idea of refusing to recognize certain licenses, a move that could shield its own market but risk clashes within the EU’s legal framework. For France, the promise of EU crypto regulation only holds if one license truly means one standard.
How Malta and other “lenient” jurisdictions are raising enforcement concerns
Malta has become a test case for the risks of uneven MiCA enforcement in MiCA regulation. An ESMA peer review of the Malta Financial Services Authority (MFSA) found that while the regulator had sufficient expertise and resources, its authorization process only “partially” met expectations. Licenses were sometimes granted despite unresolved compliance issues, and supervisory histories were not adequately assessed. ESMA urged Malta to tighten reviews of business plans, governance, IT systems, conflicts of interest, and unregulated services.
The high approval volume also raises doubts about whether oversight can match the pace of authorizations. Transparency adds another layer of risk, with vague licensing decisions making it difficult for other regulators or investors to gauge consistency.
The danger is not outright misconduct but regulatory arbitrage: firms may secure easy entry through Malta’s lighter-touch regime and then passport into stricter markets like France. This undermines the credibility of EU crypto regulation, raising fears of inconsistent investor protections and reputational damage if weaker-licensed firms collapse..
The Case for ESMA Oversight: France, Italy, and Austria push for Centralized Supervision
France, Italy, and Austria are pushing for the European Securities and Markets Authority (ESMA) to take on centralized oversight of major crypto firms, arguing it would strengthen MiCA’s framework and prevent regulatory loopholes. Proponents say ESMA supervision would ensure consistency across the EU, setting clear minimum standards for licensing, AML/CFT, governance, and cybersecurity. This would help curb regulatory arbitrage while pooling expertise and resources that smaller regulators may lack, particularly in areas like tech risk and cross-border crime.
A centralized watchdog could also boost investor confidence, making Europe more attractive to institutional capital, while improving cross-border enforcement and closing gaps in MiCA, from token offerings to non-EU firm oversight.
But resistance remains. Critics like Malta argue that shifting power to ESMA undermines national sovereignty and risks imposing one-size-fits-all rules that stifle innovation. There are concerns that centralized oversight could be overly cautious, slow down licensing, and add compliance burdens that deter startups or push activity offshore.
Implementation is another challenge. Defining which firms ESMA should supervise directly may require complex legislative changes. It could even create duplication, with firms caught between ESMA and national regulators.
Will uneven enforcement damage Europe’s credibility as a crypto hub?
Uneven enforcement of MiCA is more than a regulatory debate; it strikes at the heart of Europe’s credibility as a crypto hub. If firms licensed under weaker regimes collapse through fraud, insolvency, or hacks, the damage will not stop at national borders; investors may begin to distrust the EU licensing system as a whole, raising risk premiums and deterring institutional capital.
Legal uncertainty adds to the problem: if countries like France refuse to honor passports from jurisdictions they deem too lenient, firms face unpredictability in cross-border operations, driving up compliance and legal risks that investors dislike.
Globally, reputation matters. To compete with hubs like the U.S., U.K., Singapore, or the Middle East, the EU must project consistency and reliability. Loopholes or fragmented supervision instead risk undermining its position, with even one major failure potentially triggering contagion across markets, particularly in sensitive areas like stablecoins, DeFi, or cybersecurity.
The stakes are high—not only could instability fuel political backlash, but crypto companies might also relocate to friendlier jurisdictions, draining Europe of innovation and economic value. With ESMA’s critical review of Malta already making headlines and France, Italy, and Austria demanding tighter oversight, the message is clear that without decisive action, investor trust may erode.
Can stricter controls strengthen MiCA — or will they choke innovation across the EU?
The long-term future of MiCA hinges on how the balance between stricter enforcement and innovation is struck. Stronger oversight could transform MiCA licenses into a true badge of trust, reassuring investors and institutions that firms meet robust standards on governance, cybersecurity, and AML/CFT.
This credibility may deepen Europe’s markets, attract institutional capital, and strengthen DeFi and custodial infrastructure anchored in the region, while also reducing systemic risks from unstable firms or illicit finance. Harmonized supervision could level the playing field, eliminate regulatory shopping, and foster a more resilient single market, with ongoing refinements improving technical standards and best practices over time.
Also Read: We Must Balance Innovation and Regulation for Crypto to Really Thrive
Yet, these gains come with risks. Increased compliance demands may slow down startups, raise costs, or push innovation toward larger incumbents. If member states add their own restrictions or undermine MiCA passporting, Europe may lose the very competitiveness the regulation was designed to build. Overly rigid rules may also fail to adapt to emerging models like algorithmic tokens or novel DeFi protocols, driving firms to friendlier jurisdictions such as Switzerland, Singapore, or the UAE. A possible middle path would see ESMA oversee the largest systemic firms, while national regulators manage smaller players under stronger peer review and transparent standards.
Stricter MiCA Enforcement — Benefits vs. Drawbacks
Conclusion: Safeguarding or Fragmentation?
The future of MiCA regulation will determine whether Europe emerges as a unified crypto hub or a fragmented market weighed down by national differences. Effective EU crypto regulation could attract global capital and strengthen Europe’s financial standing. But weak enforcement, divergent licensing standards, or resistance to MiCA passporting could undermine credibility and drive firms elsewhere.
Ultimately, investor confidence is the tipping point. Strong, consistent oversight could cement Europe’s role in digital finance, while gaps or scandals could derail its ambitions. MiCA’s fate will show whether the EU can balance innovation with protection or fracture under its own complexity.
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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