France’s securities watchdog, the AMF, is concerned that under the EU’s new regulatory regime, crypto companies are seeking out jurisdictions with more lenient licensing standards, its president, Marie-Anne Barbat-Layani, said.
MiCA, a landmark set of digital asset rules which came into force this year, allows crypto companies to apply for licences from individual EU members, which they can use as a “passport” to operate throughout the 27-nation bloc. The legislation has already exposed inconsistencies in how national regulators apply the rules, raising questions about whether some licences are being granted too quickly and whether cross-border firms are being adequately supervised.
OVERSIGHT GAPS RAISE ALARM
At stake is oversight of the multi-trillion-dollar crypto industry, which regulators globally have long warned could destabilise markets and harm investors if not properly supervised.
On Monday, France joined Italy and Austria in calling for the European Securities and Markets Authority (ESMA), based in Paris, to take over supervision of major crypto firms, according to a position paper seen by Reuters.
In its strongest warning yet, the AMF told Reuters that France would not rule out the possibility of using the “atomic weapon” of challenging the “passporting” of a license granted by a different member state.
A hallmark of the EU’s single market for financial services, “passporting” allows companies authorised by one member state to operate across the bloc. The AMF did not give details about which companies’ licences it could consider challenging, or on what basis.
“We do not exclude the possibility of refusing the EU passport,” Barbat-Layani said. “It’s very complex legally and not a very good signal for the single market – it’s a bit like the ‘atomic weapon’ … but it’s still a possibility we hold in reserve.”
Crypto platforms “are doing their regulatory shopping all over Europe, trying to find a weak link that will give them a licence with fewer requirements than the others,” she added, without providing specific examples.
MAJOR DIFFERENCES BETWEEN REGULATORS
In Monday’s paper, France’s AMF, Italy’s Consob and Austria’s FMA called on European lawmakers to introduce a mechanism to transfer powers to ESMA.
“The first few months of the application of the Regulation have revealed major differences in how crypto-markets are being supervised by national authorities,” the three regulators said.
Direct European supervision would better protect investors, they said.
Malta’s financial regulator faced scrutiny over its licence-granting process earlier this year. An ESMA review found that Malta did not do enough to assess the risk when granting a licence to one particular unnamed crypto company. Malta said it was proud of its role as an “early adopter” of digital asset regulation.
The French, Italian and Austrian regulators did not give examples of where regulators had interpreted the rules differently.
Crypto companies are in the process of applying for MiCA licences during a transition period. Luxembourg granted a licence to U.S.-listed exchange Coinbase and Malta gave a licence to the Winklevoss-founded exchange Gemini.
France, Italy and Austria also called for MiCA revisions, including stricter rules for crypto companies’ activities outside of the EU, better cybersecurity supervision, and a review of how authorities manage new crypto token offerings.
France has long been pushing for ESMA to be given greater power. ESMA head Verena Ross has said she would welcome the move, but it faces resistance from some EU members.
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