Briefing
Member States, including France, Italy, and Austria, are formally challenging the implementation of the Markets in Crypto-Assets Regulation (MiCA) due to inconsistent national licensing standards and a resulting “race to the bottom” for regulatory approval. This action directly threatens the core MiCA “passporting” principle, which was designed to grant a single license for operation across the entire European Union, by exposing the market to significant regulatory arbitrage risk. The strategic consequence is the proposal for the European Securities and Markets Authority (ESMA) to assume direct, centralized oversight for large, systemic Crypto-Asset Service Providers (CASPs), fundamentally altering the regulatory architecture after 54 MiCA licenses have already been granted.
Context
MiCA was established to resolve the EU’s fragmented legal ambiguity by creating a single, harmonized framework where national competent authorities (NCAs) would grant licenses that are then “passported” across the EU single market. The prevailing compliance challenge was the risk that NCAs would compete to attract CASPs by offering the least stringent interpretation of the MiCA requirements, thereby undermining the law’s objective of creating a high-standard, unified market. This inconsistency in the initial phase of implementation has materialized, with some national regulators granting licenses more rapidly or with less rigorous scrutiny than others.
Analysis
The proposal for centralized ESMA oversight represents a critical structural update to the compliance framework for all regulated entities. This action signals that the EU will not tolerate the systemic risk introduced by regulatory arbitrage, effectively moving the ultimate point of regulatory authority from the national to the supranational level for systemic CASPs. The chain of cause and effect mandates that entities must now pivot their compliance strategy away from optimizing for the most lenient NCA and toward meeting a single, high-bar standard set by ESMA. This shift is a decisive move to enforce the spirit of MiCA, requiring firms to prepare for a more uniform and rigorous compliance audit regime focused on operational resilience and consumer protection.
Parameters
- Total MiCA Licenses Granted → 54 → The number of CASP and stablecoin licenses issued across the EU since the regulation became fully applicable, illustrating the scope of the initial, fragmented implementation phase.
- Challenging Member States → France, Italy, Austria → The countries actively proposing a shift toward centralized ESMA oversight to counter national regulatory inconsistencies.
- Core Regulatory Principle Under Threat → MiCA Passporting Principle → The mechanism allowing a single license from one EU Member State to provide services across all 27 Member States.
Outlook
The immediate next phase involves intense political negotiation within the European Commission and the Council to formalize the expansion of ESMA’s mandate for direct supervision. This push sets a strong precedent that regulatory harmonization in digital assets will ultimately trend toward centralized, supranational control to mitigate systemic risk and jurisdictional competition, particularly for entities deemed critical to financial stability. The strategic effect is a clear message to the industry → long-term business viability in the EU will depend on meeting the highest common denominator of compliance, not the lowest.
Verdict
The push for centralized ESMA oversight is a definitive strategic pivot, confirming that the EU’s ultimate goal is systemic risk control via supranational authority over regulatory fragmentation.
