France Threatens to Block Crypto License Passporting under MiCA

Tensions are rising within the European Union as France, backed by Italy and Austria, has warned it may block provisions of the bloc’s new Markets in Crypto-Assets (MiCA) regulation that allow crypto firms licensed in one member state to operate freely across the EU. The dispute highlights concerns about the effectiveness of cross-border oversight and the risks of regulatory arbitrage in a rapidly evolving sector.

At the heart of the issue is “passporting,” a mechanism that enables firms authorized in one EU country to serve customers across the entire single market without needing additional licenses. While passporting has long been a cornerstone of the EU’s financial services framework, critics argue that applying it to crypto firms could expose the system to risks if regulatory standards vary too widely between member states. France’s financial regulator has been particularly vocal, warning that weaker enforcement in some jurisdictions could allow bad actors to exploit loopholes.

Supporters of MiCA say the framework was designed precisely to avoid fragmentation and to create a unified set of rules for the crypto sector. They argue that passporting is essential for fostering innovation and enabling European crypto firms to compete globally. Removing or limiting the mechanism, they warn, could undermine the EU’s efforts to position itself as a leader in digital finance.

The pushback from France and its allies reflects deeper concerns about the ability of national regulators to effectively monitor cross-border activity in a sector prone to cybersecurity breaches, fraud, and market manipulation. The French government has also cited recent examples of crypto-related failures in smaller EU markets as evidence that a more cautious approach is needed.

Industry groups have reacted with alarm, saying the uncertainty could deter investment and stifle growth in Europe’s digital asset ecosystem. Some firms are already considering relocating to friendlier jurisdictions if the final MiCA rules are watered down. For startups and mid-sized crypto companies, the ability to scale quickly across Europe is seen as vital to their survival.

The European Commission now faces the challenge of balancing calls for stricter safeguards with the need to maintain a coherent, competitive regulatory framework. Negotiations over the final shape of MiCA are expected to intensify in the coming months, with the outcome likely to set the tone for Europe’s role in the global crypto industry.

For now, the dispute underscores the difficulty of regulating a borderless technology within a union of 27 member states, each with its own approach to financial oversight. Whether Europe opts for a unified system or a more fragmented one will have lasting implications for both regulators and the companies seeking to navigate the new landscape.