France Pushes Unified Crypto Oversight to Protect Euro Sovereignty

France has intensified its push for centralized oversight of cryptocurrency regulation within the European Union, urging the European Securities and Markets Authority (ESMA) to assume direct supervision of major crypto firms to address regulatory arbitrage and protect the eurozone's financial sovereignty. The Bank of France and the country's financial watchdog, the Autorité des Marchés Financiers (AMF), have joined forces with regulators from Italy and Austria to advocate for a unified approach under MiCA, the EU's Markets in Crypto-Assets framework. Their goal is to harmonize enforcement across member states, which currently vary in their interpretation and application of MiCA rules, creating gaps that crypto firms exploit to seek lighter regulationsCointelegraph^[5].

The AMF has warned it may block the "passporting" rights granted under MiCA if national regulators fail to align oversight standards. Passporting allows crypto firms licensed in one EU country to operate across all 27 member states without additional approvals. However, France argues that this system risks enabling regulatory arbitrage, where companies secure licenses in jurisdictions perceived as more lenient-such as Malta or Luxembourg-and then expand into larger markets like France. This practice, critics say, undermines investor protection and market integrity. AMF President Marie-Anne Barbat-Layani stated that France could "refuse to recognize licences from other states" as a last resort, though she acknowledged the move could destabilize the EU's single market.

ESMA has been actively working to address these challenges. A recent peer review of Malta's licensing process for crypto-asset service providers (CASPs) highlighted inconsistencies, including inadequate risk assessments and unresolved material issues during authorizationsEuropean Securities and Markets Authority^[2]. The review, focused on a single case, aims to establish best practices for all EU national competent authorities (NCAs). ESMA also issued supervisory guidelines to prevent market abuse under MiCA, emphasizing risk-based oversight and cross-border cooperationEuropean Securities and Markets Authority^[4]. These efforts align with broader EU goals to streamline crypto regulation and reduce fragmentation, but implementation remains uneven. Smaller member states like Lithuania and Luxembourg have swiftly issued MiCA licenses to major exchanges, while larger economies like France lag in granting approvalsCointelegraph^[3].

Stablecoins, particularly dollar-backed tokens like USDT and USDC, have emerged as a focal point of concern. The Bank of France's governor, François Villeroy de Galhau, warned that the rapid growth of stablecoins threatens the euro's sovereignty by enabling unregulated, cross-border financial flows outside the EU's controlCointelegraph^[5]. He argued that MiCA's current framework allows multi-issuance stablecoins-tokens issued both inside and outside the EU with partial reserves-to erode the euro's role in digital payments and settlements. This risk is compounded by the U.S. federal government's recent enactment of the GENIUS Act, which introduces a more lenient regulatory environment for stablecoins in the U.S., potentially attracting European users and institutionsCoinedition^[7].

The European Systemic Risk Board (ESRB) has echoed these concerns, recommending a ban on multi-issuance stablecoins to mitigate systemic risksCointelegraph^[5]. Meanwhile, the ECB's blog highlighted that stablecoins could disrupt traditional banking by diverting deposits and altering credit availability, particularly in Europe's bank-centric financial systemCoinedition^[7]. To counter these risks, France and other EU countries are advocating for stricter MiCA provisions, including enhanced cybersecurity standards and clearer boundaries between crypto assets and financial instruments governed by MiFID II.

The debate over centralized oversight has intensified as ESMA explores expanding its authority to supervise major crypto operators directlyCointelegraph^[3]. While ESMA Chair Verena Ross supports the move, some member states resist ceding control to a central body. The European Central Bank (ECB) and private sector initiatives like the digital euro project are also seen as complementary tools to reinforce the EU's financial resilience. Projects such as Pontes and Appia aim to integrate tokenized assets with central bank money and create shared registries for cross-border transactionsCoinedition^[7].

The EU's ability to enforce a unified regulatory framework will depend on balancing innovation with investor protection. While MiCA's passporting mechanism was designed to foster a single market, its effectiveness hinges on consistent enforcement. France's warnings underscore the tension between national regulatory autonomy and the need for harmonization. As ESMA prepares to issue further guidelines and the European Commission considers expanding its oversight role, the coming months will test the EU's capacity to address these challenges without fracturing its financial integration efforts.