Malta Rejects ESMA Centralization
Malta’s financial regulator has publicly opposed efforts to hand the European Securities and Markets Authority (ESMA) direct oversight of crypto firms. The move deepens the divide among European regulators over how to apply the bloc’s Markets in Crypto-Assets (MiCA) framework.
France, Italy, and Austria have called for ESMA to take control, arguing that inconsistent supervision by national regulators could create regulatory loopholes. France’s financial watchdog even warned it might challenge licenses granted in other EU states if it believed standards were too lax.
The Malta Financial Services Authority (MFSA) disagreed, stating that it supports coordination but not centralization. According to the regulator, creating another supervisory layer would “introduce unnecessary bureaucracy” and risk undermining the EU’s competitiveness.
Tensions Over MiCA’s Passporting Model
The rift stems from MiCA’s “passporting” model, which allows firms licensed in one EU state to operate across all 27. Critics like France argue this leaves room for companies to exploit weaker regimes, while Malta insists that national regulators must remain in charge.
Verena Ross, ESMA chair, acknowledged the tension, saying any change to the oversight system would require consensus among member states—something that remains elusive. She noted that France has been the most vocal supporter of centralized supervision, while other countries, including Malta, continue to resist.
ESMA’s Review of Malta Licensing
Earlier this year, ESMA conducted a review of Malta’s licensing process for crypto firms. The July report revealed that the MFSA only “partially met expectations” when authorizing crypto asset service providers, leaving material issues unresolved at the approval stage.
The findings included gaps in governance, ICT standards, and anti-money laundering procedures. ESMA argued that such risks should be resolved before licensing, not deferred to post-approval monitoring.
Despite these criticisms, ESMA acknowledged Malta’s staffing and expertise, urging the MFSA to tighten its procedures. In response, the MFSA has since strengthened transparency rules, requiring firms to publish clear and EU-specific licenses on their websites.
Stablecoin Disagreements Add Pressure
The clash over oversight comes as MiCA faces its first major test: how to regulate multi-issuance stablecoins. A report by the Centre for European Policy Studies (CEPS) highlighted growing uncertainty over whether stablecoins issued jointly by EU and non-EU entities would be allowed.
The European Central Bank (ECB) raised sovereignty and prudential concerns, while others warned that excluding multi-issuance stablecoins would harm both consumer protection and EU competitiveness.
A Divided EU at a Critical Juncture
The ongoing rift illustrates how fragmented Europe’s approach to crypto remains, even under MiCA. While France, Italy, and Austria demand EU-level control, Malta and others insist that national regulators should retain authority.
For now, no consensus exists on centralizing crypto oversight, leaving the EU at a critical juncture. MiCA’s promise of a unified digital asset market will depend on whether regulators can bridge these divisions—or whether disputes like Malta’s pushback will slow down Europe’s race to regulate crypto at scale.
