France Highlights MiCA Loophole, Calls For A Reform

France has issued a stark warning that it could move to block crypto firms from operating within its borders using EU-wide “passport” licenses, raising the stakes in Europe’s rollout of its landmark Markets in Crypto-Assets Regulation (MiCA). The move underscores growing concerns in Paris that regulatory loopholes could allow firms to shop for the weakest jurisdictions, undermining investor protection and the credibility of the bloc’s new framework.

Under MiCA, which took effect for crypto service providers in December 2024, a license granted in one EU member state allows a firm to operate across all 27 nations under a single “passport.” But France’s securities regulator, the Autorité des Marchés Financiers (AMF), has cautioned that this system may open the door for companies to exploit lighter-touch regimes in certain countries.

“We do not exclude the possibility of refusing the EU passport,” said AMF chair Marie-Anne Barbat-Layani in comments to Reuters, likening such a move to an “atomic weapon” for the market given its potential to disrupt Europe’s integrated licensing system.

France is not alone in sounding the alarm. Alongside regulators in Austria and Italy, Paris has flagged that inconsistent national supervision could water down MiCA’s effectiveness. Early evidence already points to uneven enforcement: some regulators have been accused of applying lower standards during the authorization process, giving firms a pathway to sidestep stricter jurisdictions.

Call for ESMA Oversight

In response, France, Italy, and Austria have jointly urged EU lawmakers to centralize oversight of major crypto firms under the European Securities and Markets Authority (ESMA), based in Paris. Proponents argue that a pan-European supervisor would ensure more consistent oversight, enhance investor protections, and prevent regulatory arbitrage across the bloc.

The three countries also back amendments to MiCA, including stricter rules for non-EU crypto businesses, stronger cybersecurity requirements, and tighter controls over new token launches.

Concerns are not hypothetical. In July, ESMA published a peer review of Malta’s Financial Services Authority (MFSA), concluding that the regulator only “partially met expectations” in vetting a crypto service provider. The findings suggested gaps in how risks were assessed at the authorization stage, prompting ESMA’s Peer Review Committee to recommend closer monitoring and stronger supervisory practices.

This has fueled fears that jurisdictions with lighter oversight could become “weak links” in the EU framework, attracting firms seeking easier entry while putting investors and markets at greater risk.

High Stakes for Europe’s Digital Asset Market

The timing of the debate is critical. Crypto companies are racing to secure MiCA licenses during the transition period, with Luxembourg recently licensing Coinbase and Malta approving Gemini. France’s hardline stance—and its willingness to challenge EU passporting rights—could reshape where global exchanges and service providers choose to anchor their European operations.

If Paris follows through, it would mark one of the most forceful challenges yet to MiCA’s passporting mechanism, potentially fragmenting the very system meant to harmonize Europe’s digital asset market.

For now, France’s warning, coupled with calls for ESMA to step in, signals that the battle over MiCA’s enforcement is far from settled. The outcome will determine whether the EU emerges as a truly unified crypto market—or one fragmented by uneven rules and national pushback.