France Threatens to Block Crypto Firms Licensed Elsewhere in EU

France has issued a stern warning that it may block certain cryptocurrency companies from operating within its borders if they obtain licenses from other European Union member states. This move is part of a broader effort to transfer cryptocurrency regulatory authority to the EU's central securities regulator.

The French financial regulator, the Autorité des Marchés Financiers (AMF), has expressed concerns that under the new EU regulatory framework, cryptocurrency companies may seek licenses from jurisdictions with more lenient standards. The Markets in Crypto-Assets (MiCA) regulation, which came into effect this year, allows cryptocurrency companies to apply for licenses in any EU member state, with the license serving as a "passport" to operate across all 27 EU countries.

Since the implementation of MiCA, inconsistencies in rule enforcement among member states have raised questions about the adequacy of oversight. There are concerns that some licenses may have been issued too hastily and that cross-border cryptocurrency companies may not be sufficiently regulated.

France, along with Italy and Austria, has called on the European Securities and Markets Authority (ESMA) to take over the regulation of large cryptocurrency companies. In a position paper obtained, the three countries urged European lawmakers to establish a mechanism for transferring regulatory powers to ESMA. They argued that direct regulation at the European level would better protect investors, given the significant differences in how member states are implementing MiCA.

The AMF has not specified which companies' licenses it might challenge or the basis for such challenges. However, the regulator has indicated that it is considering the "ultimate measure" of questioning the validity of licenses issued by other EU member states. This move, while legally complex, is seen as a last resort to ensure compliance with regulatory standards.

The AMF has also noted that cryptocurrency platforms are "shopping around" for regulatory jurisdictions with lower requirements, but did not provide specific examples. The regulator's concerns highlight the need for a more unified approach to cryptocurrency regulation within the EU.

In the initial months of MiCA's implementation, discrepancies in regulatory practices have become apparent. For instance, earlier this year, the licensing process of the Maltese financial regulator came under scrutiny. An ESMA review found that Malta had not adequately assessed the risks when issuing a license to an unnamed cryptocurrency company. Malta, however, has expressed pride in its role as an early adopter of digital asset regulation.

France, Italy, and Austria have also called for amendments to MiCA, including stricter rules for cryptocurrency companies operating outside the EU, enhanced network security oversight, and a review of how regulators manage the issuance of new types of cryptocurrencies.

France has long advocated for granting ESMA greater powers, a move welcomed by ESMA Chair Verena Ross but opposed by some EU member states. The push for centralized regulation reflects growing concerns about the potential market instability and investor harm posed by the unregulated cryptocurrency industry.