12h05
4 min read ▪ by Luc Jose A.
Article Summary:The EU’s ambition for harmonized crypto regulation under MiCA faces challenges due to national differences, institutional critiques, and passporting issues. ESMA is now pushing for centralized control, risking conflicts with national regulators. Use ChatGPT, Perplexity, or Grok for further summarization.
Key Points:
- The European Union is struggling to create unified crypto regulations despite the Markets in Crypto-Assets (MiCA) regulation taking effect.
- The European Securities and Markets Authority (ESMA) is raising concerns about a fragmented supervisory approach managed by individual nations.
- Varied standards exist in countries like Lithuania, Malta, and Luxembourg, which have issued MiCA licenses to major crypto businesses.
- ESMA particularly criticizes the inconsistencies in authorization procedures and advocates for centralized oversight at the EU level.
National Oversight Under Strain
Verena Ross, who heads the European Securities and Markets Authority (ESMA), expressed worries about the current structure for supervising crypto within the EU in a Financial Times interview. This follows her prior cautions regarding tokenized stocks in September.
She noted “ongoing market fragmentation” resulting from assigning regulatory tasks to individual national bodies. She points out that each authority has to develop its own expertise and monitoring systems, which leads to inefficiencies.
ESMA believes that this decentralized strategy impedes the growth of an integrated market and weakens Europe’s standing in global competitiveness.
Specifically, the MiCA regulation, which went live in June 2024, stipulates that each member country is still responsible for issuing licenses to crypto service providers. This has caused a very uneven spread of initial approvals.
Certain regions, particularly smaller, more flexible ones, have been proactive:
- Lithuania was the first to grant a MiCA license to Robinhood Europe.
- Malta has given the green light to big platforms such as OKX and Crypto.com.
- Luxembourg has approved the registration of Coinbase and Bitstamp.
However, this national approach is creating problems. Last July, ESMA voiced concerns about Malta’s authorization process, citing control standards that weren’t strong enough. These disparities from country to country are undermining MiCA’s primary objective: to establish a consistent, reliable framework for all 27 member states.
Single Market Divided by Passporting Conflicts
Aside from institutional critiques, applying the “passporting” rule, a vital part of the MiCA regulation, is creating increasing conflict among member countries.
This system enables a business authorized in one member nation to provide its services throughout the EU without needing extra clearance. While this principle is supposed to simplify market integration, it is instead fueling national competition.
Jerome Castille, compliance officer at CoinShares, states that the biggest challenge of MiCA now lies in “the uniformity of its application across the 27 member states“.
Countries such as France are now exploring restrictions on market access for specific businesses authorized elsewhere in the EU. This position, while still tentative, challenges one of the basic principles of the European single market.
Marina Markezic, executive director of the European Crypto Initiative, reminds that “27 different national competent authorities supervising the same regulation“, which, according to her, goes against the ambition of a truly harmonized framework.
This atmosphere of regulatory ambiguity could deter international companies and hinder investment and innovation within the European market. Given this, the proposal to consolidate oversight with ESMA could provide a more efficient approach and ensure the survival of the MiCA project, particularly with France considering blocking certain crypto companies.
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Luc Jose A.
A graduate of Sciences Po Toulouse with a blockchain consultant certification from Alyra, I joined Cointribune in 2019.
Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this constantly evolving ecosystem. My goal is to enable everyone to better understand the blockchain and to seize the opportunities it offers. I strive every day to provide an objective analysis of current events, to decipher market trends, to relay the latest technological innovations and to put into perspective the economic and societal issues of this ongoing revolution.
Disclaimer:The views expressed in this article are solely those of the author and should not be considered investment advice. Conduct thorough research before making investment decisions.