France Might Try to Prevent EU Crypto Companies from Using MiCA ‘Passports’

France has indicated it may attempt to obstruct cryptocurrency firms operating locally with licenses acquired from other European nations, highlighting concerns over enforcement gaps in the European Union’s crypto regulatory framework.

The country’s financial regulator, the Autorité des Marchés Financiers (AMF), informed Reuters on Monday that it is worried about possible gaps in regulatory enforcement related to Europe’s Markets in Crypto-Assets Regulation (MiCA), the first comprehensive crypto regulatory framework globally.

Fearing that some cryptocurrency firms might pursue licenses in more accommodating EU jurisdictions, the AMF is contemplating a prohibition on operating in France using MiCA licenses from other member states.

“We do not rule out the possibility of denying the EU passport,” stated Marie-Anne Barbat-Layani, chair of AMF, while adding that the situation is “very complex,” resembling an “atomic weapon” for the market.

She further noted that crypto companies are looking for a “weak link” in European jurisdictions that would offer a “license with fewer requirements than the others.”

Under MiCA, which will apply to crypto-asset service providers as of December 2024, companies approved in one member state can use this as a “passport” to operate throughout the 27-nation bloc. France’s warning underscored fears that inconsistent standards could jeopardize the framework.

Related: MiCA can draw more crypto investment despite concerns over regulation

France, Austria, Italy urge ESMA to oversee major crypto firms

France has joined two other countries in requesting that the European Securities and Markets Authority (ESMA) based in Paris assume supervision of significant crypto companies, as reported by Reuters, referencing a position paper reviewed by its reporters.

Austria’s Financial Market Authority and Italy’s financial markets regulator, Commissione Nazionale per le Società e la Borsa, have similarly called for regulatory oversight to be shifted to ESMA.

The trio also supports amendments to MiCA, including tougher regulations for crypto operations outside the EU, enhanced cybersecurity checks, and a reassessment of regulations governing new token offerings.

Related: SEC chair pledges notice before action for crypto firms: FT

This discussion follows mounting criticism of Malta’s crypto licensing framework. In July, ESMA published a peer review of the Malta Financial Services Authority’s authorization of a crypto service provider, revealing that the regulator only “partially met expectations.”

Following the review, the ESMA’s ad hoc Peer Review Committee (PRC) advised that the MFSA “evaluate material issues that were unresolved at the time of the authorization or had not been sufficiently addressed during the authorization process.”

The PRC emphasized that Malta’s MFSA “must closely monitor the increase in authorization applications” and promptly identify and modify supervisory practices.