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The Markets in Crypto-Assets (MiCA) regulation was introduced to harmonize crypto regulation across the European Union (EU), aiming to create a unified framework for crypto-asset service providers (CASPs). Central to this framework is the concept of “passporting,” which allows CASPs licensed in one EU member state to operate across the entire bloc.
However, without effective passporting, MiCA risks becoming a fragmented system that undermines its core objectives.
Fragmentation of Regulatory Oversight
MiCA’s promise of a single market is threatened by divergent interpretations among national regulators. France’s securities regulator, the Autorité des Marchés Financiers (AMF), has warned that it may block passporting rights for crypto firms licensed in other EU countries due to concerns about regulatory arbitrage (Cointelegraph, 2025a). This move highlights the lack of uniform enforcement and the potential for firms to exploit lenient jurisdictions, thereby weakening investor protection and market integrity.
Increased Risk of Financial Crime
The absence of harmonized passporting mechanisms creates vulnerabilities in anti-money laundering (AML) enforcement. France has expressed concern that inconsistent licensing standards could allow criminals to exploit weaker jurisdictions and move illicit funds across borders (Fincrime Central, 2025). Without standardized customer due diligence and transaction monitoring, MiCA’s framework may inadvertently facilitate financial crime.
Compliance Burden and Market Inefficiency
CASPs face increased compliance costs when passporting is ineffective. Instead of benefiting from a streamlined regulatory environment, firms must navigate varying national requirements, which stifles innovation and competition. Smaller firms, in particular, are disadvantaged by the complexity and cost of multi-jurisdictional compliance (Cryptonomist, 2025).
Undermining Europe’s Global Competitiveness
MiCA was intended to position the EU as a leader in crypto regulation. However, regulatory uncertainty and fragmented enforcement deter investment and talent. The lack of effective passporting undermines the EU’s attractiveness as a hub for crypto innovation, pushing firms toward more predictable jurisdictions (Cointelegraph, 2025b).
The Need for Centralized Supervision
To address these challenges, France, Austria, and Italy have called for the European Securities and Markets Authority (ESMA) to take over supervision of major crypto firms (MSN, 2025). Centralized oversight would ensure consistent application of MiCA, reduce regulatory arbitrage, and strengthen AML safeguards. However, this shift would require legislative changes and could reopen political negotiations, introducing further uncertainty (Cointelegraph, 2025a).
Conclusion
MiCA’s effectiveness hinges on the integrity of its passporting mechanism. Without it, the regulation risks entrenching fragmentation and exposing the EU to financial crime and inefficiency. To fulfill its promise, the EU must prioritize harmonized enforcement, robust AML standards, and centralized supervision.
References
Cointelegraph. (2025a, September 16). France’s threat to block “passporting” questions EU MiCA Regulations. https://cointelegraph.com/news/france-block-passporting-unified-eu-mica-regulations
Cointelegraph. (2025b, September 15). France says it may block crypto companies licensed in other EU countries. https://cointelegraph.com/news/france-block-mica-passporting-eu-crypto-firms
Cryptonomist. (2025, September 15). MiCA, France considers halting EU passporting: risk of fragmentation for crypto licenses. https://en.cryptonomist.ch/2025/09/15/mica-france-considers-halting-eu-passporting-risk-of-fragmentation-for-crypto-licenses/
Fincrime Central. (2025, September). France threatens passporting block over MiCA money laundering concerns. https://fincrimecentral.com/france-mica-passporting-money-laundering-risk/
MSN. (2025, September 15). Exclusive: France threatens to block crypto licence ‘passporting’ in EU regulatory fight. https://www.msn.com/en-us/money/companies/exclusive-france-threatens-to-block-crypto-licence-passporting-in-eu-regulatory-fight/ar-AA1MyZMd
The Inadequacies of MiCA Without Effective Passporting was originally published in Pundi X on Medium, where people are continuing the conversation by highlighting and responding to this story.
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