France has warned that it may block cryptocurrency companies licensed to operate in other EU member states—known as the "passporting mechanism"—raising concerns about the enforcement of core cryptocurrency regulations within the EU27.
According to a Reuters report on Monday, the French securities regulator, the Autorité des Marchés Financiers (AMF), is considering prohibiting cryptocurrency companies licensed in other member states from operating in France. This move by the AMF stems from concerns that some cryptocurrency companies are seeking licenses in EU jurisdictions with looser regulations.
Less than a year before the EU's Markets in Crypto-Assets Regulation (MiCA) comes into effect for cryptocurrency service providers, the AMF has issued this warning. MiCA aims to establish a unified regulatory framework for Europe and is designed to prevent the regulatory arbitrage that the AMF currently refers to.
While some legal experts believe this move contradicts MiCA's provisions, other industry observers argue that, from a technical standpoint, this approach is legally feasible, albeit with significant legal complexities.
Marina Markezic, Executive Director of the European Crypto Initiative (EUCI), stated, "MiCA aims to establish a unified regulatory framework that allows businesses to enter a single regulatory market across the EU. Now, this commitment is being tested. From what we observe, it is technically possible to prevent passporting under MiCA, but it will bring significant legal complexities."
She added that recent policy position papers indicate increasing divergence among national regulators regarding the implementation of MiCA, with differing views on key regulatory issues.
According to policy position papers seen by Reuters, on Monday, France became the third country, after Austria and Italy, to call for the European Securities and Markets Authority (ESMA), headquartered in Paris, to oversee major cryptocurrency companies.
Cointelegraph has reached out to ESMA for comment but has not received a response as of publication.
Markezic noted that some of the proposals "require legislative amendments to MiCA itself," which would "reopen political negotiations and potentially bring new uncertainties to the industry."
Other legal experts argue that the AMF's threat is not legally feasible under the MiCA framework. Edwin Mata, co-founder and CEO of asset tokenization platform Brickken, stated, "Legally, the AMF cannot prevent an entity that has obtained formal MiCA licensing from operating in France."
Mata explained that the AMF can regulate behavior, raise regulatory concerns, and refer cases to ESMA, but it cannot unilaterally impose barriers on companies licensed by any member state. He added:
Mata pointed out that the French securities regulator's statement is more of a "warning," indicating that France will "examine whether companies are attempting to structure products that should fall under MiFID II regulation as products under MiCA," referring to the EU's Markets in Financial Instruments Directive II (MiFID II) framework.
Mata further noted that the main challenge for regulators is to ensure that cryptocurrency companies do not exploit "loose regulations" for financial instruments to evade the regulation of products that should be classified as securities.
Related: Tom Lee: Bitcoin (BTC) and Ethereum (ETH) may see "huge surges" in the next three months.
Original article: “EU Crypto Regulation Under Test — France Considers Blocking 'Passporting' Mechanism”
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