National regulatory conflicts disrupt the EU's unified approach to cryptocurrency

The EU’s Markets in Crypto-Assets Regulation (MiCA), established to create consistent oversight of digital assets throughout the EU, is facing mounting challenges as member states adopt varying approaches to enforcement. This threatens to splinter the regulatory landscape and diminish protections for investors. France, Austria, and Italy have been vocal in their criticism, pointing out that the uneven implementation of MiCA has led to regulatory arbitrage, where companies seek out countries with more relaxed requirements to obtain licenses title1 [ 1 ]. France’s financial authority, the Autorité des Marchés Financiers (AMF), has noted “substantial differences” in how national regulators interpret the law. Some countries, like Malta, have accelerated the approval process, while others, including France, are more cautious and deliberate title2 [ 2 ]. This patchwork approach has sparked fears that businesses might exploit more lenient jurisdictions and use the EU’s “passporting” system to operate freely across borders title3 [ 3 ].

To address these issues, France, Austria, and Italy have suggested that the European Securities and Markets Authority (ESMA) should directly supervise major crypto-asset service providers, believing centralized oversight would offer stronger investor protections and better align with international norms. Their proposal also recommends imposing tighter rules on offshore platforms that target EU consumers, mandatory cybersecurity checks for MiCA licensees, and a unified registry for token white papers to clarify legal requirements title1 [ 1 ]. AMF President Marie-Anne Barbat-Layani has referred to the ability to challenge passporting as a “nuclear option,” indicating France may block crypto firms licensed by other EU countries if they do not meet French standards title4 [ 4 ]. Still, legal specialists warn that such moves could run counter to MiCA’s intended harmonization across the EU title5 [ 5 ].

This debate highlights broader obstacles in putting MiCA into practice. Although the regulation seeks to close loopholes that allow regulatory arbitrage, its dependence on national licensing has revealed weaknesses. For example, Malta’s rapid rollout of MiCA licensing came under fire for approving applications too quickly, with at least one unnamed crypto company being granted approval despite inadequate risk reviews from Maltese officials title4 [ 4 ]. On the other hand, France's slow licensing process—granting its first MiCA license to Deblock in June 2025—has raised fears of discouraging participation from the crypto industry, especially as larger non-EU competitors might find it easier to satisfy EU rules title3 [ 3 ]. These trends could weaken the EU’s position in the global crypto market, with industry leaders warning that firms from the U.S. or Dubai could gain an advantage over their European counterparts title3 [ 3 ].

The conflict between unified regulation and national flexibility is intensifying as the phase-in period for MiCA approaches its 2026 completion date. The European Crypto Initiative (EUCI) acknowledges that technically, passporting could be blocked, but warns this would create legal complications and could undermine the principles behind the EU’s single market title5 [ 5 ]. Meanwhile, the AMF’s willingness to dispute foreign-issued licenses is part of a broader push to reshape how MiCA is enforced, with several regulators calling for legislative revisions to fix enforcement shortcomings title5 [ 5 ]. The resolution of these disagreements will ultimately decide if MiCA can realize its vision of a cohesive regulatory structure or if it will devolve into a fragmented system governed by national rules.

The implications go well beyond the crypto industry. Detractors argue that inconsistent enforcement may hurt the EU’s ability to compete internationally in digital assets, especially as U.S. regulations such as the GENIUS Act introduce tougher standards for stablecoins that could impact MiCA’s future direction title1 [ 1 ]. While both the U.S. and EU set requirements for stablecoin reserves and redemption, the GENIUS Act’s additional stipulations—like enhanced separation from banking operations and stricter passporting rules—underscore the differences in regulatory philosophies title1 [ 1 ]. Ultimately, how the EU balances its national interests with the need for unified regulation will determine MiCA’s effectiveness and its influence on the broader crypto ecosystem.