France is considering measures to restrict the operations of certain cryptocurrency businesses that are licensed in other EU nations. This action stems from a desire to shift oversight of crypto transfers to the European Securities and Markets Authority (ESMA), as indicated by the head of France’s financial regulatory body in a statement to Reuters.
Marie-Anne Barbat-Layani, president of the Autorité des Marchés Financiers (AMF), France’s securities regulator, expressed concern that some crypto firms are strategically choosing EU jurisdictions with less stringent licensing procedures under the bloc’s new regulatory framework.
MiCA, a groundbreaking set of rules governing digital assets that took effect this year, allows crypto enterprises to secure licenses from individual EU member states. These licenses then function as a “passport,” granting permission to operate across all 27 nations within the EU.
The new regulations have already highlighted inconsistencies in the way different national regulators are implementing the rules. This raises concerns about the speed with which some licenses are being approved and the adequacy of supervision for companies operating across borders.
OVERSIGHT CONCERNS MOUNT
The core issue revolves around the supervision of the massive crypto industry, valued in the trillions of dollars. Regulators worldwide have repeatedly cautioned that inadequate oversight could destabilize financial markets and endanger investors.
France, alongside Italy and Austria, formally requested on Monday that the Paris-based ESMA assume responsibility for overseeing major crypto firms, according to a policy document reviewed by Reuters.
In its most forceful warning to date, the AMF informed Reuters that France is prepared to consider using the “atomic weapon” – challenging the validity of a license granted by another EU member state through the “passporting” system.
The “passporting” mechanism, a key feature of the EU’s single market for financial services, allows companies authorized in one member state to conduct business throughout the bloc. The AMF refrained from specifying which companies’ licenses might be challenged or on what grounds.
“We are not ruling out the possibility of rejecting the EU passport,” stated Barbat-Layani. “It presents significant legal complexities and sends a negative message about the single market – it’s akin to the ‘atomic weapon’… but it remains a potential option we are keeping in reserve.”
She added that crypto platforms are engaging in “regulatory shopping across Europe, seeking out the weakest link that will provide them with a license under less demanding requirements,” though she did not cite particular examples.
SIGNIFICANT REGULATORY DISCREPANCIES
In their joint paper on Monday, the AMF of France, Consob of Italy, and FMA of Austria urged European lawmakers to establish a mechanism for transferring authority to ESMA.
“The initial months of implementing the Regulation have revealed considerable discrepancies in the way national authorities are supervising crypto-markets,” the regulators stated, asserting that direct European supervision would offer stronger investor protection.
A spokesperson for ESMA confirmed that the regulator is committed to “working diligently” to ensure consistent authorization and supervision of crypto firms throughout the EU.
The spokesperson also referenced a previous paper published by ESMA, advocating that lawmakers contemplate pan-EU supervision for the crypto sector.
Earlier in the year, Malta’s financial regulator faced scrutiny regarding its license-granting procedures. An ESMA review concluded that Malta failed to adequately assess risks when granting a license to a specific, unnamed crypto company. Malta defended its position, emphasizing its role as an “early adopter” of digital asset regulation.
The French, Italian, and Austrian regulators did not provide specific instances of differing interpretations of the rules by national regulators.
Crypto companies are currently applying for MiCA licenses during a transitional period. Luxembourg has granted a license to Coinbase COIN.O, a U.S.-listed exchange, while Malta has issued a license to Gemini, the exchange founded by the Winklevoss twins Gemini.
France, Italy, and Austria are also advocating for revisions to MiCA, including stricter regulations on crypto companies’ activities outside the EU, enhanced cybersecurity oversight, and a review of how authorities manage new crypto token offerings.
France has consistently advocated for greater authority for ESMA. Verena Ross, the head of ESMA, has expressed support for such a move, but it encounters resistance from some EU members.