Crypto Firms Rush for EU Licenses Amid Regulatory Concerns

As the European Union implements its new MiCA rules, major cryptocurrency companies are eager to obtain licenses and operate across the EU. However, this rapid process has raised concerns among regulators who fear that the speed of approvals may compromise thorough oversight.

Gemini, the crypto platform co-founded by billionaires Tyler and Cameron Winklevoss, is on the verge of securing a license in Malta, the EU’s smallest member state. This license would allow Gemini to operate across all 27 EU member states. This development follows Malta's recent approval of licenses for OKX and Crypto.com, just weeks after MiCA came into effect.

Malta’s swift approvals have drawn scrutiny from EU regulators, particularly the European Securities and Markets Authority (ESMA). France’s financial regulator has expressed concerns that weak oversight could lead to a “race to the bottom,” where countries compete to offer the least stringent regulations. There are also worries about whether smaller regulatory teams in countries like Malta can provide adequate oversight.

In response to these concerns, ESMA is reviewing Malta’s licensing process and is expected to release a report soon. Malta’s regulator has defended its speedy approvals, attributing them to past experience and a deep understanding of the industry. The regulator also emphasized that it follows strict anti-money laundering rules, and OKX has described the process as rigorous, with compliance being a top priority.

Meanwhile, Luxembourg is expected to approve a license for Coinbase, the first U.S. crypto firm in the S&P 500. Despite having a small team in Luxembourg, Coinbase has 200 staff in Europe and plans to hire 20 more in Luxembourg by the end of the year. Luxembourg has pushed back on claims of being too lenient, suggesting that other countries might be trying to attract crypto firms. Coinbase’s move is seen as a setback for Ireland, whose central bank has previously compared crypto to a Ponzi scheme.

The core issue revolves around maintaining control over the multi-trillion-dollar crypto market. MiCA aims to bring crypto under the same regulatory standards as traditional finance, but differing enforcement across countries could weaken its overall impact. There are ongoing discussions about granting more power to ESMA, with its chief advocating for stronger oversight. However, some countries are hesitant to increase ESMA’s authority.

How these early licenses are handled will likely set the tone for how the EU balances crypto growth and investor protection in the future. The controversy highlights the challenges of regulating a rapidly evolving industry and the need for a balanced approach that fosters innovation while ensuring robust oversight. As the crypto market continues to grow, regulators around the world will need to navigate these challenges carefully to create a regulatory framework that supports innovation while protecting investors and the broader financial system.