ESMA Reviews Malta's Crypto Authorization Process Amid MiCA Concerns

The European Securities and Markets Authority (ESMA) has initiated a formal review into Malta’s authorization process of a crypto firm under the Markets in Crypto Assets (MiCA) regime. This move has sparked discussions across the European Union over how the new crypto law is being applied, as national regulators are implementing it differently. Malta’s fast-track approval has raised concerns over compliance, investor protection, and equal treatment.

According to ESMA, Malta’s financial watchdog approved a crypto firm despite several unresolved issues. Some risk areas were reportedly overlooked during the authorization phase. These included governance, conflict of interest checks, business models, and technological readiness. Although the Malta Financial Services Authority (MFSA) was found to have sufficient resources and expertise, ESMA highlighted lapses in due diligence. The review found that the regulator’s early supervision needed stronger risk assessment in key areas related to crypto infrastructure and services.

ESMA has called on all national competent authorities (NCAs) across the EU to take note of the findings. The agency advised regulators to reinforce their evaluation of risk factors such as IT architecture, decentralized products, and cross-border operations. Promotion of unregulated services was also flagged as an area of concern. This guidance aims to ensure all Crypto Asset Service Provider (CASP) licenses across the EU go through robust and uniform scrutiny. The review stresses that while it centers on Malta, the recommendations apply to every jurisdiction under MiCA. ESMA sees this step as crucial for building consistent supervisory practices in a rapidly evolving sector.

The outcome of this review may cause delays in licensing decisions throughout the EU. Authorities may now proceed more cautiously, particularly for firms with aggressive expansion models or complex structures. The crypto industry could face stricter oversight during the onboarding process. Additionally, the review positions ESMA as a central authority ensuring that no country undermines MiCA’s core objective, unified regulation. This move reinforces the need for cross-border cooperation among regulators as the EU adapts to the new framework. ESMA’s findings serve as a signal to the market that lenient authorizations will not go unchecked. The agency plans to continue peer reviews to help strengthen supervisory capacity and foster better harmonization. All NCAs are expected to integrate the recommendations into their licensing processes.

Malta's point-of-supply licensing model has been a key factor in its attractiveness to crypto firms, with the region boasting a significant number of jobs and economic contributions tied to the crypto industry. However, the fast-track process has been met with skepticism, as it may lead to regulatory arbitrage, where firms seek to exploit differences in regulatory standards to gain a competitive advantage. This concern is particularly relevant given the EU's efforts to create a unified regulatory landscape for crypto assets. The review by ESMA is part of a broader effort to ensure that all member states adhere to the principles of MiCA, which include transparency, fairness, and consistency in regulatory practices. The outcome of this review could have significant implications for Malta's crypto industry, as well as for the broader EU regulatory framework. If ESMA finds that Malta's practices are not in line with MiCA, it could lead to changes in the licensing process or even the revocation of certain licenses. This would be a significant development, as Malta has been a hub for crypto firms seeking to operate within the EU.

The scrutiny of Malta's fast-track licensing process highlights the challenges of creating a harmonized regulatory environment for crypto assets. While the MiCA regime aims to provide a comprehensive framework, the diversity of regulatory practices across member states presents a significant hurdle. ESMA's review of Malta's practices is a critical step in addressing these challenges and ensuring that the EU's regulatory goals are met. The outcome of this review will be closely watched by industry stakeholders and regulators alike, as it could set a precedent for how the EU approaches regulatory consistency in the crypto space.