France has warned that it may try to block some crypto firms licensed in other EU countries from operating domestically as part of a push to transfer oversight to the bloc’s central securities regulator, according to the head of its financial watchdog.
Marie-Anne Barbat-Layani, president of France’s securities watchdog, the AMF, told Reuters that the agency is concerned that under the new EU regulatory regime, crypto companies are seeking out jurisdictions with more lenient licensing standards.
MiCA, a landmark set of digital asset rules that came into force this year, allows crypto companies to apply for licenses from individual EU members. They can then use this license as a “passport” to operate throughout the 27-nation bloc.
However, the legislation has already exposed inconsistencies in how national regulators apply the rules, raising questions about whether some licenses are being granted too quickly and whether cross-border firms are being adequately supervised.
Oversight Gaps Raise Alarm
At stake is the supervision of the multi-trillion-dollar crypto industry, which regulators globally have long warned could destabilize markets and harm investors if not properly supervised.
On Monday, France, along with Italy and Austria, called for the European Securities and Markets Authority (ESMA), based in Paris, to take over the supervision of major crypto firms, according to a position paper seen by Reuters.
In its strongest warning yet, the AMF told Reuters that France would not rule out the possibility of using the “atomic weapon” of challenging the “passporting” of a license granted by a different member state.
Barbat-Layani said, “We do not exclude the possibility of refusing the EU passport. It’s very complex legally and not a very good signal for the single market – it’s a bit like the ‘atomic weapon’… but it’s still a possibility we hold in reserve.”
She added that crypto platforms “are doing their regulatory shopping all over Europe, trying to find a weak link that will give them a license with fewer requirements than the others,” though she did not provide specific examples.
Major Differences Between Regulators
In Monday’s paper, the AMF, Italy’s Consob, and Austria’s FMA called on European lawmakers to introduce a mechanism to transfer powers to ESMA. “The first few months of the application of the Regulation have revealed major differences in how crypto-markets are being supervised by national authorities,” the three regulators stated. They argued that direct European supervision would better protect investors.
This push follows a review by ESMA that found Malta’s financial regulator did not do enough to assess risk when granting a license to one particular unnamed crypto company.
The French, Italian, and Austrian regulators did not give specific examples of where other regulators had interpreted the rules differently.
Crypto companies are currently applying for MiCA licenses during a transition period. Luxembourg has already granted a license to the U.S.-listed exchange Coinbase, and Malta has licensed the Winklevoss-founded exchange Gemini.
France, Italy, and Austria also called for revisions to MiCA, including stricter rules for crypto firms’ activities outside of the EU, better cybersecurity supervision, and a review of how authorities manage new crypto token offerings.
