TLDR
- France may block crypto firms with EU MiCA licenses from other member states.
- France’s concerns involve “regulatory shopping” for more lenient EU jurisdictions.
- Legal experts debate whether France can block MiCA licenses, with some saying it’s feasible.
- France, Austria, and Italy push for stronger EU-wide crypto supervision under ESMA.
France has raised concerns that some cryptocurrency companies may exploit the European Union’s Markets in Crypto-Assets Regulation (MiCA) to operate under more lenient licensing regimes within the EU. The French securities regulator, the Autorité des Marchés Financiers (AMF), is considering blocking crypto firms from operating in France under licenses issued by other EU member states through the “passporting” mechanism, which allows firms to operate across the EU once licensed in one member state.
The warning was issued after growing concerns that some crypto companies are engaging in “regulatory shopping,” seeking jurisdictions with looser rules to bypass stricter oversight in countries like France. The potential move comes less than a year after MiCA came into effect, which aimed to provide a harmonized framework for crypto regulation across the EU.
France Challenge of Regulatory Arbitrage
MiCA is intended to create a single regulatory framework for crypto firms in the EU, allowing them to operate across the bloc with a single license. However, the implementation of MiCA has highlighted disparities in how different member states interpret and apply the regulation. This has led to concerns that firms could take advantage of countries with less stringent regulations, undermining MiCA’s goal of creating a unified market.
Marina Markezic, executive director of the European Crypto Initiative (EUCI), pointed out that while the move to block passporting may be legally possible, it would introduce significant legal complexities.
“From what we’ve seen, blocking passporting under MiCA is technically possible, though it comes with significant legal complexity,” she said. This reflects the growing tension over how MiCA should be enforced across member states.
Legal Debate Over MiCA Enforcement
The proposed ban on passporting has sparked debate among legal experts. Some argue that the AMF’s actions would be contrary to the provisions of MiCA, which was designed to ensure uniformity across the EU. Edwin Mata, a lawyer and CEO of asset tokenization platform Brickken, stated that under MiCA, the AMF cannot unilaterally block companies licensed in other EU states.
“MiCA is a regulation, not a directive, which means it applies directly and uniformly across all Member States,” he explained.
Mata also noted that while the AMF can monitor the conduct of crypto firms and escalate concerns to the European Securities and Markets Authority (ESMA), it cannot impose direct barriers on firms licensed in other member states. Instead, the AMF’s position may be a warning to ensure that crypto firms are not exploiting loopholes by structuring products under MiCA when they should fall under other financial regulations, such as the Markets in Financial Instruments Directive II (MiFID II).
Strengthening EU Crypto Supervision
The issue has also raised questions about the enforcement of MiCA and whether the European Securities and Markets Authority (ESMA) should take a more active role in overseeing major crypto firms. France, Austria, and Italy have called for ESMA to assume greater responsibility in regulating crypto firms operating across the EU, as national regulators have taken divergent approaches to MiCA.
In a joint position paper, the three countries emphasized the need for more uniformity in MiCA enforcement and proposed strengthening the framework, particularly in areas such as cybersecurity, token management, and oversight of operations outside the EU. The goal is to prevent regulatory fragmentation and ensure that crypto firms operating within the EU meet high standards of oversight and transparency.
