EU Moves Toward Major Overhaul of Crypto Regulation

Less than two years after the entry into force of MiCA, the ambition of a unified European framework for cryptos is faltering. Amid national divergences, institutional criticisms and tensions over passporting, the European Union struggles to deliver the promised coherence. And now, ESMA is advocating to take back control, at the risk of reigniting tensions between Brussels and national regulators.

National supervision running out of breath

In an interview with the Financial Times, Verena Ross, chairwoman of the European Securities and Markets Authority (ESMA), warns about the limits of the current crypto supervision model in the European Union, while she had already warned against tokenized stocks in September.

She deplores a “continued fragmentation in markets“, caused by the delegation of regulatory missions to national authorities. Each authority must build its own expertise and its own surveillance system, which results in inefficiencies, she emphasizes.

For ESMA, this decentralized approach hinders the emergence of an integrated market and harms Europe’s competitiveness on the international stage.

Specifically, the MiCA regulation, which came into force in June 2024, provides that each member state remains responsible for granting licenses to crypto service providers. This has led to a very uneven distribution of initial authorizations.

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Some jurisdictions, notably the smaller and more agile ones, have taken the lead:

• Lithuania issued the first MiCA license to Robinhood Europe;
• Malta authorized large platforms like OKX and Crypto.com;
• Luxembourg validated the registration of Coinbase and Bitstamp.

However, this national dynamic poses a problem. Last July, ESMA criticized the Maltese authorization process, revealing insufficiently robust control standards. These differences from one country to another undermine MiCA’s original goal: to establish a unified and reliable framework for all 27 member states.

A single market fractured by tensions over cross-border access

Beyond institutional criticisms, the implementation of the “passporting”, a cornerstone of the MiCA regulation, is causing increasing frictions between member states.

This mechanism allows a company licensed in one member country to offer its services throughout the Union without needing additional approval. A principle that, on paper, facilitates market unification, but which, in practice, rekindles national rivalries.

Jerome Castille, compliance officer at CoinShares, states that the biggest challenge of MiCA now lies in “the uniformity of its application across the 27 member states“.

Countries like France are now considering restricting access to their markets for certain companies authorized elsewhere in the Union. This stance, although still at the project stage, would challenge one of the foundations of the European single market.

Marina Markezic, executive director of the European Crypto Initiative, reminds that “27 different national competent authorities supervising the same regulation“, which, according to her, goes against the ambition of a truly harmonized framework.

This climate of regulatory uncertainty could have a deterrent effect for international players, but also slow down investment and innovation dynamics within the European market. In this context, the proposal to centralize supervision with ESMA could become an efficiency lever, but also a survival condition for the MiCA project, as France considers blocking certain crypto companies.