At the centre of the clash is a push led by France, Italy and Austria to hand more direct supervisory authority to the European Securities and Markets Authority, known as ESMA, on the grounds that national regulators are applying the rules unevenly. France’s market watchdog has gone further, saying it could even seek to block the “passporting” of licences issued in other member states if it believes standards are too lax. That would strike at one of the core features of the single market, under which a firm authorised in one EU country can operate across the bloc.
Malta’s Financial Services Authority has rejected that approach. It has said centralisation at this stage would add another layer of bureaucracy and weaken efficiency just as the EU says it wants to improve competitiveness. That argument has now become more pointed, with Malta contending that firms faced with slower approvals and more red tape would simply establish themselves in jurisdictions they see as more commercially workable. Bloomberg reported that Maltese officials see Dubai, Abu Dhabi, the US and Asian markets as the likely beneficiaries of any such shift.
The political sensitivity is heightened by Malta’s place in the digital-asset sector. The country built an early reputation as Europe’s “blockchain island” after moving ahead of many peers with crypto-specific legislation. It has sought to market itself as a jurisdiction that combines EU access with a regulatory environment more open to innovation than larger member states often favour. That strategy has made crypto a bigger economic and reputational issue for Malta than for many other European countries, which helps explain why the current row has become so sharp.
Yet Malta’s position is not without vulnerabilities. Reuters reported last year that ESMA had scrutinised Malta’s licence-granting process and found shortcomings in how risk had been assessed in at least one unnamed case. France, Italy and Austria have used concerns like that to argue that the first months of MiCA have already exposed major differences in supervisory practice. Their case is that a fragmented system invites regulatory shopping, with firms seeking the easiest entry point into the EU while still gaining bloc-wide access.
MiCA itself was designed to solve an older problem: a patchwork of national rules that left crypto companies, investors and banks facing uneven standards across Europe. ESMA says the regulation creates uniform EU market rules for crypto-assets, covering transparency, disclosure, authorisation and supervision. The regime entered into force in June 2023, with the new framework and register being rolled out in stages through late 2024 and 2025. Supporters of stronger central oversight argue that common rules will not mean much if enforcement still varies significantly from one capital to another.
Malta’s counterargument is that over-correction carries its own risk. If Europe becomes known as a place where licensing slows, compliance costs rise and policy power shifts further from market participants, companies may decide that the bloc is no longer worth the effort. That fear is not entirely theoretical. The UAE has spent the past few years building specialist virtual-asset frameworks through Dubai’s VARA and Abu Dhabi Global Market, both of which promote themselves as regulatory homes for virtual-asset businesses. Hong Kong has also been widening its digital-asset rulebook, while the US has reopened debate over long-delayed federal market-structure legislation and crypto-specific guidance.
That does not mean all rival jurisdictions are looser. Some are in fact becoming more demanding, especially on anti-money laundering, custody, disclosures and market conduct. Singapore’s Monetary Authority has said it has set a high bar for digital token service providers and will generally not issue licences where money-laundering risks are elevated. Hong Kong’s regulators have tightened standards even as they try to position the city as a digital-asset hub. The competitive issue for Europe, therefore, is less about whether regulation exists and more about whether firms see the EU system as predictable, efficient and commercially coherent.
For Brussels, the dispute exposes a broader problem running through Europe’s capital-markets agenda. Policymakers want deeper, more integrated markets, but member states remain wary of surrendering supervisory power. Reuters has reported that crypto oversight has become part of that wider debate over whether more authority should shift to EU-level institutions in the name of competitiveness and harmonisation. Malta, like some other smaller states, appears determined to resist that transfer where it sees national expertise and economic interest at stake.
Arabian Post – Crypto News Network
Follow Arabian Post
Select Arabian Post as your preferred source on Google and MSN News for trusted business news and Arab politics and updates.
