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

France has indicated it might attempt to prevent cryptocurrency firms from operating locally under licenses obtained from other European nations, raising concerns about enforcement gaps in the European Union’s crypto regulatory structure.

The Autorité des Marchés Financiers (AMF), France’s securities regulator, informed Reuters on Monday that it is wary of possible regulatory enforcement gaps associated with Europe’s Markets in Crypto-Assets Regulation (MiCA), the first comprehensive framework for crypto regulation globally.

Worried that some crypto firms might pursue licenses in jurisdictions within the EU that are more lenient, the AMF is contemplating a ban on operations in France under MiCA licenses acquired in other member states.

“We do not exclude the possibility of refusing the EU passport,” said Marie-Anne Barbat-Layani, chair of AMF, to Reuters, mentioning that the situation is “very complex” and comparable to an “atomic weapon” for the market.

She noted that crypto companies are searching for a “weak link” in European jurisdictions that will issue a “license with fewer requirements than others.”

Under MiCA, which will come into force for crypto-asset service providers in December 2024, companies authorized in one member state can utilize this as a “passport” to operate throughout the 27-nation bloc. France’s warning underscores apprehensions that inconsistent standards could weaken the framework.

Related: MiCA can draw more crypto investment despite concerns of overregulation

France, Austria, Italy urge ESMA oversight of major crypto firms

France has joined Austria and Italy in urging the European Securities and Markets Authority (ESMA) based in Paris to assume oversight of major crypto firms, as reported by Reuters, citing a position paper accessed by its journalists.

Austria’s Financial Market Authority and Italy’s financial markets regulator, Commissione Nazionale per le Società e la Borsa, have also advocated for regulatory supervision to be handed over to ESMA.

The three countries have additionally supported amendments to MiCA, which include stricter regulations for crypto activities outside the EU, enhanced cybersecurity oversight, and a review of the regulation of new token offerings.

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

This discussion follows increasing scrutiny of Malta’s crypto licensing regime. In July, ESMA published a peer review of the Malta Financial Services Authority’s approval of a crypto service provider, determining that the regulator only “partially met expectations.”

Following the review, ESMA’s ad hoc Peer Review Committee (PRC) suggested that the MFSA “assess material issues that were pending at the date of authorization or that have not been sufficiently considered at the authorization stage.”

The PRC further advised that Malta’s MFSA “needs to closely monitor the rise in authorization applications” and timely identify and adjust supervisory practices.