France Threatens to Block MiCA License Passporting Over Oversight Concerns
France’s financial regulator AMF has warned it may block crypto firms holding EU licenses from operating within French borders unless oversight standards improve. The French authority, alongside Italy’s Consob and Austria’s FMA, published proposals on September 15 demanding stricter enforcement of the Markets in Crypto-Assets (MiCA) regulation.
The warning highlights growing tensions over how different EU member states implement the bloc’s new crypto framework. Under MiCA, which took effect for crypto-asset service providers in December 2024, companies authorized in one member state can use this as a “passport” to operate across the 27-nation bloc. However, the three regulators argue that this system creates regulatory arbitrage opportunities.
MiCA Passporting System Faces Regulatory Pushback
Luxembourg granted a license to Coinbase, while Gemini secured authorization in Malta, decisions critics say highlight the fragmented approach. The AMF believes some member states apply less stringent authorization standards. This creates unfair competitive advantages for firms choosing easier licensing jurisdictions.
The regulators set out four proposals, with the chief among them being handing direct supervision of the largest crypto-asset service providers to the European Securities and Markets Authority (ESMA). They want ESMA to oversee major crypto firms directly rather than leaving supervision to individual national authorities.
The French regulator targets firms that obtain licenses in permissive jurisdictions but conduct most business elsewhere. These companies can currently access French markets without meeting AMF’s stricter standards. The regulator considers this arrangement to undermine investor protection and market integrity.
Key Proposals Target MiCA Framework Gaps
The authorities also want to close loopholes allowing EU intermediaries to route orders to offshore platforms and impose stronger restrictions on non-EU activities. These changes would prevent EU-licensed firms from easily accessing unregulated exchanges outside the bloc.
The proposals include tighter third-country equivalence requirements and pre-authorization cyber audits. Regulators want crypto firms to undergo comprehensive cybersecurity assessments before receiving operating permits. They also seek stricter rules for partnerships with non-EU entities.
The three authorities propose centralizing white paper submissions to eliminate inconsistent approval processes across member states. Currently, firms can shop for the most favorable jurisdiction to file their documentation. Standardized procedures ensure uniform application of disclosure requirements.
Enhanced reporting obligations for cross-border activities represent another key reform demand. Regulators want detailed transaction reporting when firms operate outside their home jurisdiction. This would improve oversight of international crypto business operations.
Broader Implications for EU Crypto Markets
The regulators cited early inconsistencies in supervision across member states as a key concern, with proposals aiming to align supervision of crypto-asset service providers. The discord threatens the single market principle that allows free movement of financial services across EU borders.
Industry observers worry that fragmented enforcement could undermine MiCA’s effectiveness. Different interpretations of rules across member states might create compliance confusion for crypto firms. This regulatory uncertainty could discourage investment in European crypto markets.
The French threat represents the most serious challenge to MiCA’s passporting system since its implementation began. If concerns about oversight gaps persist, other strict regulatory jurisdictions may follow France’s lead. Such actions could effectively balkanize EU crypto markets along national lines.
Major crypto exchanges face potential operational disruptions if France blocks their access. Firms might need separate licenses for each major EU market rather than relying on a single authorization. This would significantly increase compliance costs and operational complexity.
Market Response and Future Outlook
Retail investors could experience indirect effects from the proposed regulatory changes. Stricter oversight might reduce available services or increase costs as firms adapt to enhanced compliance requirements. However, stronger protection measures could boost consumer confidence in crypto markets.
The European Commission must decide whether to accept these reform proposals or maintain the current framework. ESMA faces pressure to develop clearer guidance on consistent MiCA implementation across member states. Resolution of these tensions will shape the future structure of EU crypto regulation.
France’s ultimatum forces a critical decision point for European crypto policy. The outcome will determine whether MiCA achieves its goal of harmonized regulation or fragments into competing national approaches. Industry stakeholders await clarity on how regulators will balance market access with oversight effectiveness.
Conclusion
The success of Europe’s crypto regulatory framework now depends on finding a compromise between national sovereignty and single market principles. France’s challenge may strengthen MiCA by forcing more consistent implementation across the EU.
