France’s recent statement suggesting they might restrict cryptocurrency businesses from operating within their borders using licenses granted by other European Union countries is sparking debate. This practice, known as “passporting,” allows firms licensed in one EU nation to operate in others, and the potential block raises concerns about the effectiveness of the EU’s comprehensive crypto legislation.
According to a Reuters report released Monday, France’s financial markets authority, the AMF (Autorité des Marchés Financiers), is weighing the possibility of preventing crypto firms from operating in France if their licenses were secured in other, potentially less stringent, EU nations. The AMF’s apprehension stems from the perception that some crypto businesses are strategically seeking licenses in jurisdictions with more relaxed regulatory environments.
This warning emerges less than a year after the EU’s landmark Markets in Crypto-Assets (MiCA) Regulation took effect for cryptocurrency service providers. MiCA aimed to establish a consistent regulatory landscape across Europe and address the very regulatory arbitrage the AMF is now highlighting.
While some legal experts interpret this stance as conflicting with MiCA’s core principles, others within the industry believe it’s technically achievable, albeit at the expense of significant legal complications.
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Marina Markezic, Executive Director of the European Crypto Initiative (EUCI), emphasized the tension this creates. “MiCA was intended to establish a unified framework, granting companies access to a single, regulated market across the EU. That promise is now facing challenges. Based on what we’ve observed, blocking passporting under MiCA is technically possible, though it would introduce substantial legal complexities.”
She further noted that these recent statements showcase “growing disagreements concerning MiCA’s implementation, as national authorities adopt divergent perspectives on crucial supervisory matters.”
On Monday, France joined Austria and Italy in urging the Paris-based European Securities and Markets Authority (ESMA) to assume oversight of major crypto companies, according to a position paper obtained by Reuters journalists.
Cointelegraph has contacted ESMA for comment but has not yet received a response.
Markezic cautioned that some of these proposals “require legislative amendments to MiCA itself,” which would “reopen political discussions and potentially introduce renewed uncertainty for the industry.”
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MiCA Under Scrutiny: Debate over Crypto License “Passporting”
Other legal professionals argue that the AMF’s threat is legally untenable under the MiCA framework. Edwin Mata, a lawyer, co-founder, and CEO of asset tokenization platform Brickken, asserts, “The AMF lacks the legal authority to prevent a properly licensed MiCA entity from operating within France.”
Mata explained that “The AMF can oversee operations, express supervisory concerns, and escalate cases to ESMA. However, it cannot unilaterally impose barriers” for companies licensed in any member state. He further clarified:
“MiCA operates as a regulation, not a directive, meaning it’s directly and uniformly applicable across all Member States.”
He believes the French regulator’s pronouncements are more of a “warning shot,” indicating that France will “carefully examine whether firms are attempting to structure products under MiCA when they should actually be subject to MiFID II regulations,” referencing Europe’s Markets in Financial Instruments Directive II (MiFID II) framework designed for traditional securities markets.
Mata concluded that the primary challenge for regulators involves ensuring that crypto companies don’t exploit “less demanding regulations” intended for financial instruments that should properly be classified as securities.