The European Union has introduced its first EU-wide cryptocurrency regulation, Markets in Crypto-Asset (MiCA), which launched in December. MiCA's primary objective is to impose harmony in the sector by requiring service providers to obtain a license to operate legally within the EU. This license is issued after companies implement specific criteria related to anti-money laundering, prevention of terror group financing, IT security, and financial soundness. The framework aims to protect investors and lend credibility to a sector often perceived as poorly regulated.

Despite MiCA's goal of uniformity, disparities in implementation by member countries have created a flaw in the system. This allows companies to engage in 'regulatory shopping,' seeking authorization in the member state perceived as the most 'accommodating'. Once a MiCA license is obtained in one country, it grants access to the entire EU market, incentivizing this behavior.

Crypto experts have highlighted differences in regulatory rigor. While authorities in countries like Germany and the Netherlands, which account for the majority of the approximately 30 MiCA licenses issued so far, are generally not questioned for their integrity, other nations, notably Malta, are under scrutiny. Anonymous experts pointed to the Mediterranean island for allegedly issuing licenses hastily, even before the formal implementation of collective MiCA standards.

Concerns about lax oversight have been voiced at high levels. Marie-Anne Barbat-Layani, president of the financial markets authority in France, lamented in a Senate address about products approved with 'a rather quick signing off' by some colleagues entering the French market via the MiCA passport. She also noted that the EU markets regulator, ESMA, had initiated a 'peer review' of an unnamed regulator suspected of being too lenient. Stephane Pontoizeau, an official working under Barbat-Layani, acknowledged the persistent risk of entities 'trying to find the least demanding entry point into Europe'.

This regulatory landscape has influenced company decisions. For instance, crypto platform OKX, which initially planned to establish France as its European anchor with around 100 staff, ultimately chose Malta. Similarly, Gemini followed suit, shifting its focus from Ireland to Malta, citing the 'proactive engagement' of Maltese authorities. Mark Jennings, Gemini's head of Europe, explained that Malta began accepting applications earlier, allowing them to start the process, build teams, and establish infrastructure for MiCA compliance sooner.

In contrast, countries like France have been slower in granting approvals, having just issued its first MiCA license to fintech firm Deblock. This has led to accusations that its process is long and complex. However, France views this as providing companies more time to prepare their applications, implementing a transition period through to June 2026. Pontoizeau asserted that the French financial regulator is 'determined not to add national requirements to European rules'.

The practice of seeking easier approvals has drawn criticism. Lawyer Anne Marechal, a former legal director at the French regulator, warned against 'cut-price approvals,' stating that believing one can save time and money by choosing a lenient regulator puts companies' credibility at risk with investors.

Obtaining the necessary certification, whether a MiCA or a national license, can involve considerable financial outlay. Tangi Le Calvez, founder of crypto investment firm GOin, reported investing approximately one million euros to secure a French license, which itself inspired MiCA. He expressed concern that many players might not be able to complete all the necessary steps for compliance. This echoes the situation in Estonia, where in 2017, the introduction of mandatory crypto licenses led to 75 percent of industry participants ceasing operations.

The challenges posed by MiCA's implementation and compliance costs could have broader market implications. Claire Balva, strategy director at Deblock, highlighted the risk of European crypto firms being supplanted by competitors from regions with more flexible rules, such as the United States and Dubai. She noted that these non-European companies, with their significant financial resources, would likely have no difficulty complying with EU rules if they chose to enter the market.

Beyond competitive concerns, Balva also raised issues of 'economic sovereignty.' If a 'significant portion of cryptocurrencies held by Europeans' ends up being hosted 'on American infrastructure,' it could pose strategic economic questions for the European Union.