Exclusive France Challenges EU Crypto Licence 'Passporting' in Regulatory Battle

France Considers Blocking Crypto Firms from Other EU Countries

France is considering taking strong measures to prevent crypto firms licensed in other European Union (EU) countries from operating within its borders. This move comes as part of a broader effort to transfer regulatory oversight of the digital asset industry to the bloc’s central securities regulator, according to the head of France’s financial watchdog.

The French financial authority, known as the AMF, has raised concerns about the current EU regulatory framework for cryptocurrencies. Marie-Anne Barbat-Layani, president of the AMF, highlighted that many crypto companies are seeking jurisdictions with more lenient licensing standards. This trend has led to inconsistencies in how national regulators apply the rules, prompting questions about whether some licenses are being issued too quickly and whether cross-border firms are being adequately supervised.

The MiCA Regulation and Its Challenges

The Markets in Crypto-Assets (MiCA) regulation, which came into effect this year, allows crypto companies to apply for licenses in individual EU member states. These licenses act as a “passport” enabling firms to operate across the entire 27-nation bloc. However, the implementation of MiCA has exposed significant gaps in oversight.

The regulation is designed to ensure a consistent approach to cryptocurrency supervision, but early experiences have shown major differences in how national authorities interpret and enforce the rules. This inconsistency has raised alarms among regulators who are concerned about the potential risks posed by the multi-trillion-dollar crypto industry.

Calls for Centralized Oversight

In response to these challenges, France, along with Italy and Austria, has called for the European Securities and Markets Authority (ESMA) to take over supervision of major crypto firms. A position paper seen by DISCOVER TRENDS outlines this push for centralized oversight.

The AMF has warned that it may not rule out using what it calls the “atomic weapon” of challenging the “passporting” of a license granted by another member state. Passporting is a key feature of the EU’s single market for financial services, allowing companies authorized in one country to operate across the bloc. The AMF did not specify which companies or under what conditions it might challenge such licenses.

“We do not exclude the possibility of refusing the EU passport,” Barbat-Layani said. She described the move as legally complex and potentially damaging to the single market, comparing it to an “atomic weapon.” However, she emphasized that it remains a possibility the AMF is holding in reserve.

Regulatory Disparities and the Need for Reform

The AMF, along with Italy’s Consob and Austria’s FMA, has called on European lawmakers to introduce mechanisms to transfer powers to ESMA. They argue that the first few months of MiCA’s implementation have revealed major differences in how crypto markets are being supervised by national authorities.

Centralized European supervision, they claim, would better protect investors. ESMA, which is based in Paris, has stated it will continue working to ensure consistent authorization and supervision of crypto companies across the EU. The regulator also referenced a paper published last year encouraging lawmakers to consider pan-EU supervision for the sector.

Examples of Regulatory Scrutiny

Malta’s financial regulator faced scrutiny earlier this year after an ESMA review found that it had not done enough to assess risk when granting a license to a particular unnamed crypto company. Malta defended its approach, stating it was proud of its role as an “early adopter” of digital asset regulation.

Despite the concerns raised, the French, Italian, and Austrian regulators did not provide specific examples of where regulators had interpreted the rules differently. However, they have called for revisions to MiCA, including stricter rules for crypto companies’ activities outside the EU, improved cybersecurity supervision, and a review of how authorities manage new crypto token offerings.

Push for Greater Power for ESMA

France has long advocated for giving ESMA greater power to regulate the crypto industry. ESMA head Verena Ross has expressed openness to this idea, but the proposal faces resistance from some EU members. As the crypto industry continues to evolve, the need for a unified regulatory approach remains a pressing issue for European regulators.