France’s securities regulator, the Autorité des Marchés Financiers (AMF), is considering a move to block cryptocurrency companies from operating in the country under licenses issued by other EU member states, a development that strikes at the heart of the new EU MiCA regulation. The potential challenge, reported on Monday, targets the core principle of crypto passporting, whereby a license in one member state grants access to the entire 27-nation bloc. The AMF’s concern is that some firms are engaging in regulatory arbitrage by obtaining licenses in more lenient jurisdictions to then access the French market, a move that could undermine the law's goal of creating a single, harmonized framework for digital assets.

• A major European nation is threatening to upend the foundational principle of the bloc's landmark crypto law.
• Discover the controversial practice of "regulatory arbitrage" and why stricter nations fear a "race to the bottom."
• Learn about the conflicting legal opinions on whether a member state can legally block a company licensed under MiCA.

The Markets in Crypto-Assets (MiCA) regulation was hailed as a groundbreaking achievement, designed to end the fragmented regulatory patchwork that previously existed across Europe. Before MiCA, a crypto firm would need to seek separate, costly licenses in each of the 27 member states it wished to operate in. The central promise of the EU MiCA regulation was the creation of a harmonized framework built on the principle of crypto passporting. This system allows a crypto-asset service provider to obtain a single license from one national authority—for example, in Cyprus or Malta—and then "passport" those rights to offer services across the entire EU, including in major markets like Germany and France.

However, this very efficiency is now the source of significant tension. The French regulator’s warning highlights a deep-seated fear of regulatory arbitrage. This is the practice where companies strategically choose to get licensed in a jurisdiction known for having the fastest, cheapest, or least stringent oversight. Stricter regulators like France's AMF are concerned that this will create a "race to the bottom," where the EU's overall supervisory quality is dictated by its most lenient member. They fear that firms could obtain a light-touch license elsewhere and then use their passporting rights to target French citizens, effectively sidestepping France's historically rigorous standards for investor protection.

The legality of France's potential move is now the subject of intense debate. According to some experts, while it would violate the spirit of MiCA, a block is technically possible. "MiCA was designed to create one harmonised framework," said Marina Markezic of the European Crypto Initiative, but that promise is "now under pressure." She noted that blocking crypto passporting could be feasible, though it would involve significant legal complexity and could even require reopening political negotiations on the law itself. This uncertainty creates significant risks for companies like Gemini, which recently expanded into Europe by leveraging the MiCA framework.

Other legal experts, however, are adamant that such a unilateral block is not legally permissible. "Legally, the AMF cannot block a duly MiCA-licensed entity from operating in France," argued Edwin Mata, CEO of Brickken. He points out that the EU MiCA regulation is a "regulation," not a "directive," meaning its rules apply directly and uniformly across all member states, leaving no room for national deviation. In this view, the AMF's statement is less a direct threat and more a "warning shot," signaling its intent to aggressively scrutinize firms that may be misclassifying financial instruments that should fall under stricter securities laws (MiFID II).

This dispute is part of a larger trend of stricter nations pushing for more centralized control. France, along with Austria and Italy, has formally called for the Paris-based European Securities and Markets Authority (ESMA) to take over direct supervision of major crypto companies. This indicates a lack of trust in the ability of some national regulators to adequately police the industry. This struggle for a harmonized framework is not unique to Europe; U.S. regulators are facing their own challenges, as evidenced by the recent joint SEC/CFTC statement aimed at aligning their own fragmented approaches.

Ultimately, this challenge from France injects a dose of uncertainty into what was meant to be a landmark piece of regulatory clarity. The threat of border closures, even if only a warning, could deter investment and complicate compliance for global firms. It also highlights the universal challenge regulators face in policing an inherently borderless technology, a problem the U.S. is attempting to solve with different tools, such as the SEC's new Cross-Border Task Force. How the EU resolves this internal conflict will be a critical test for MiCA and will determine whether the dream of a single, unified European crypto market can truly become a reality.

Expert Opinion And Quotes

Edwin Mata, lawyer and co-founder, Brickken: “Legally, the AMF cannot block a duly MiCA-licensed entity from operating in France, The AMF can monitor conduct, raise supervisory concerns, and escalate cases to ESMA, but it cannot impose unilateral barriers. MiCA is a regulation, not a directive, which means it applies directly and uniformly across all Member States.” - Source

FAQs

What is the core of the dispute over the EU MiCA regulation?
France's regulator is concerned about regulatory arbitrage and is threatening to block crypto passporting, which allows firms licensed in one EU country to operate in all 27. This challenges the law's goal of a single, unified market.

What is "crypto passporting"?
Crypto passporting is a key feature of the EU MiCA regulation that allows a crypto-asset service provider to obtain one license from a single EU member state and then use that license to legally operate across the entire European Union.

Why is France concerned about this system?
France fears that companies will seek licenses in EU countries with the most lenient regulations and then use their passporting rights to offer services to French citizens, potentially undermining France's stricter investor protection standards.

Can France legally block a MiCA-licensed firm?
Legal experts are divided. Some believe it is technically possible through legal loopholes, while others argue it is illegal because the EU MiCA regulation is a directly applicable law that cannot be overridden by a single member state.