Crypto licences divide EU regulators

Two major cryptocurrency firms are about to get EU-wide licences under the bloc’s new Markets in Cryptocurrency-Assets (MiCA) rules. But the approvals are already creating tension among regulators.

MiCA, which came into effect earlier this year, lets any EU country approve a cryptocurrency company to operate in all 27 member states, Reuters reports. That structure is meant to streamline access – but not everyone in the EU agrees on how it’s being used.

Some national regulators worry approvals are happening too quickly, especially in smaller countries. Behind closed doors, concerns have been raised about whether checks are thorough.

At the centre of the debate is how the EU handles a cryptocurrency industry now worth more than $3 trillion worldwide. Without oversight, officials warn, the sector could be used for fraud or illicit finance. MiCA is supposed to prevent that, but uneven enforcement could undermine the effort.

Gemini, the cryptocurrency exchange founded by the Winklevoss twins, is reportedly close to securing a licence from Malta. That would follow approvals already granted by Malta to OKX and Crypto.com – issued just weeks after MiCA kicked in.

Other regulators have taken notice. Some, working under the European Securities and Markets Authority (ESMA), are uneasy with how fast Malta is moving. France’s financial regulator has warned publicly that the lack of EU-level control could lead to a “race to the bottom,” where countries compete to attract business by easing requirements.

One senior official said it’s hard to trust licences from countries with fewer regulatory staff and limited capacity to oversee the industry, a context in which Malta was named as a concern. ESMA is reviewing Malta’s approval process and plans to release findings soon.

Malta’s financial authority said it has approved four licences so far. It credited its speed to experience and said it applies strong anti-money laundering rules.

More scrutiny on Luxembourg

European minnow Luxembourg may soon approve a licence for Coinbase. The US-based firm, now part of the S&P 500, has had an application in process for months. One person familiar with it said the company’s physical footprint in the country is small, which has led to questions from other regulators.

Coinbase didn’t comment on the licence directly but said it has 200 employees in Europe and expects to hire more than 20 in Luxembourg by the end of the year. It called Luxembourg a well-established financial centre. A source familiar with Luxembourg’s view pushed back on criticism and suggested some complaints were driven by competition, not concern over standards.

Coinbase’s progress in Luxembourg has been seen by some as a missed opportunity for Ireland. Irish regulators have taken a tougher line: In 2023, the central bank governor compared cryptocurrency to a Ponzi scheme and warned that people often lose money in the space.

A familiar EU divide

Disagreement over cryptocurrency isn’t new. The EU regularly struggles to align enforcement in its member states, even when rules are written centrally in Brussels.

MiCA was meant to tighten controls and bring consistency, but with countries approving licences on their own, differences in approach are now back in focus.

Past crises – like the collapse of FTX in 2022 – still shape how officials approach the sector. The fallout from that fraud case pushed EU lawmakers to give cryptocurrency more attention, with MiCA part of the response.

Now, some are calling for more power to be handed to ESMA to help close the gaps. ESMA’s chair, Verena Ross, has said the agency should have a stronger role in supervising crypto, but wider support is hard to find. One source close to ongoing talks said several countries are hesitant to shift control away from national regulators.

While the EU operates as a single market, countries still compete to attract firms, and the cryptocurrency industry is no exception. That competition is part of what’s now creating friction, even as everyone follows the same rulebook on paper.

(Photo by engin akyurt)

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