National Enforcement Clashes Undermine EU Crypto Harmony

The EU’s Markets in Crypto-Assets Regulation (MiCA), enacted as a landmark framework to harmonize crypto oversight across member states, is encountering significant friction as national regulators diverge in enforcement, risking fragmentation and undermining investor protection. France, Austria, and Italy have emerged as leading critics, warning that inconsistent application of MiCA rules has created regulatory arbitrage opportunities, with firms seeking licenses in jurisdictions perceived as more lenienttitle1^[1]. The Autorité des Marchés Financiers (AMF), France’s financial watchdog, highlighted “major differences” in how national supervisors interpret the law, with some member states—such as Malta—expediting approvals while others, like France, adopt slower, more cautious approachestitle2^[2]. This inconsistency has led to concerns that firms may exploit weaker regulatory environments to operate within the EU’s single market under the “passporting” system, which allows cross-border operationstitle3^[3].

The three countries have proposed transferring direct supervision of major crypto-asset service providers to the European Securities and Markets Authority (ESMA), arguing that centralized oversight would better protect investors and align with global standards. Their position paper also calls for stricter rules on offshore platforms targeting EU users, mandatory cybersecurity audits for MiCA licenses, and a centralized system for token white papers to ensure legal claritytitle1^[1]. AMF President Marie-Anne Barbat-Layani described the potential to challenge passporting as an “atomic weapon,” signaling France’s willingness to block crypto firms licensed elsewhere in the EU if they fail to meet domestic standardstitle4^[4]. However, legal experts caution that such actions could clash with MiCA’s design, which enforces uniformity across member statestitle5^[5].

The debate underscores broader challenges in MiCA’s implementation. While the regulation aims to prevent regulatory arbitrage, its reliance on national licensing has exposed vulnerabilities. For instance, Malta’s early adoption of MiCA licensing procedures drew criticism for rushed approvals, with one unnamed crypto firm’s license scrutiny revealing insufficient risk assessments by the Maltese regulatortitle4^[4]. Conversely, France’s delayed licensing process—issuing its first MiCA license to Deblock in June 2025—has raised concerns about deterring industry participation, particularly as non-EU competitors with greater resources may comply with EU rules more easilytitle3^[3]. These dynamics threaten to erode the EU’s economic sovereignty in the crypto sector, with industry leaders warning that European firms could be outcompeted by rivals from the U.S. or Dubaititle3^[3].

The tension between harmonization and national discretion has intensified as MiCA’s transition period nears its 2026 deadline. While the European Crypto Initiative (EUCI) acknowledges that blocking passporting is technically feasible, it warns of legal complexities and potential backlash against the EU’s single market principlestitle5^[5]. Meanwhile, the AMF’s threat to challenge foreign licenses reflects a broader push to recalibrate MiCA’s enforcement, with some regulators advocating for legislative amendments to address enforcement gapstitle5^[5]. The outcome of these disputes will determine whether MiCA achieves its goal of a unified regulatory framework or instead fragments into a patchwork of national rules.

The stakes extend beyond crypto markets. Critics argue that uneven enforcement risks weakening the EU’s global competitiveness in digital assets, particularly as U.S. legislation like the GENIUS Act introduces stricter stablecoin rules that could influence MiCA’s evolutiontitle1^[1]. While the U.S. and EU share common ground in regulating stablecoins—such as reserve requirements and redemption safeguards—the GENIUS Act’s additional measures, including stricter bank separation and passporting provisions, highlight diverging approaches to oversighttitle1^[1]. For now, the EU’s ability to reconcile national interests with a cohesive regulatory strategy will define the future of MiCA and its role in shaping the crypto landscape.