France tightens control against "regulatory arbitrage": threats to prevent cryptocurrency licenses as "EU travel documents".

The French securities regulatory authority has stated that they may attempt to prevent cryptocurrency companies licensed in other European Union countries from operating domestically. This move aims to push for the transfer of regulatory authority to the central securities regulatory authority of the EU in order to eliminate the regulatory gaps risks resulting from differences in regulation between member states. Marie-Anne Barbat-Layani, Chair of the French Financial Markets Authority (AMF), stated that under the EU's new regulatory regime, cryptocurrency companies are seeking jurisdictions with more lenient licensing standards. AMF is concerned that under the milestone digital assets regulatory framework that took effect this year, cryptocurrency companies are seeking licenses from various EU member states in order to use it as a "passport" to operate within the 27 member states. This regulation has exposed inconsistencies in the application of these rules by national regulatory authorities, raising questions about the speed at which some licenses are issued and whether cross-border companies are being adequately regulated. Attention on regulatory gaps The focus is on regulating a cryptocurrency industry worth trillions of dollars. Global regulatory authorities have long warned that if this industry is not properly regulated, it could disrupt markets and harm investor interests. According to a document, on Monday, France jointly called for the European Securities and Markets Authority (ESMA) based in Paris to take over the regulatory work on major cryptocurrency companies along with Italy and Austria. AMF issued its strongest warning to the media, stating that France does not rule out the possibility of using "nuclear weapons" - challenging the "passport" system of licenses issued by another member state. The "passport" system is a prominent feature of the EU single market for financial services, allowing companies authorized by one member state to operate throughout the EU. AMF did not reveal which companies' licenses it may consider challenging or the criteria to be used. Barbat-Layani stated, "We do not rule out the possibility of refusing an EU passport. This is legally complex and not a good signal for the single market - a bit like 'nuclear weapons'... But it is a possibility we still reserve. Cryptocurrency platforms are establishing themselves on a regulatory basis throughout Europe, trying to find a weak link in order to obtain licenses with lower requirements than other institutions." However, she did not provide any specific examples. Significant differences between regulatory authorities In a report on Monday, regulatory authorities in France, Italy, and Austria all called on European legislators to introduce a mechanism to transfer power to ESMA. These authorities believe that direct European regulation will better protect investors. However, the regulatory authorities of France, Italy, and Austria did not provide specific examples of differences in regulatory interpretations of the rules. These three regulatory authorities stated, "The initial months of enforcing the rules have revealed significant differences in how national regulatory authorities regulate the cryptocurrency market." Earlier, Malta's financial regulatory authority came under scrutiny earlier this year for its licensing process. ESMA's assessment found that Malta had not adequately assessed risks when granting a license to an unnamed cryptocurrency company. Malta stated that it takes pride in being a "pioneer" in regulating crypto assets. During the transition period, cryptocurrency companies are applying for licenses under the Cryptocurrency Act. Luxembourg granted a license to the US-listed trading platform Coinbase (COIN.US), while Malta issued a license to the Gemini trading platform. France, Italy, and Austria also called for amendments to the Markets in Crypto-Assets (MiCA) legislation, including stricter regulations for cryptocurrency companies operating outside the EU, improved cybersecurity supervision, and a review of authorities managing the issuance of new crypto tokens. France has long been advocating for giving ESMA more power. ESMA Chair Verena Ross stated that she would welcome this move, but it has faced resistance from some EU member states.