Kalkine: Loopholes in MiCA Crypto Regulation Challenge Uniform Oversight Across EU

Highlights

• EU-wide MiCA framework aims for harmonised crypto regulation but faces inconsistencies in member state enforcement

• Companies may seek easier licensing paths in less stringent jurisdictions within the bloc

• National disparities raise concern over uneven security and financial compliance standards

The cryptocurrency sector, broadly relevant to indices like the ftse 100, ftse 350, and FTSE AIM 100 Index, is undergoing a regulatory transition as the European Union enforces its first unified licensing regime under the Markets in Crypto-Assets (MiCA) regulation. The directive, which officially launched in December, mandates service providers to secure authorisation across the bloc after satisfying conditions related to IT security, anti-money laundering, and financial soundness.

Diverging Implementation Across Member States

Although the MiCA regime was created to eliminate regulatory fragmentation, execution at the national level has introduced disparities. Once a company secures a licence in any EU member state, it can operate across the entire single market. This flexibility, however, has prompted some firms to strategically apply in countries perceived to have less rigid licensing practices.

While member states like Germany and the Netherlands have been seen as maintaining rigorous standards, others such as Malta have faced scrutiny. Regulatory authorities in key financial jurisdictions note a pattern of approvals that appear expedited or inadequately reviewed, raising concerns about the robustness of the screening procedures in some member countries.

Fast-Track Licensing Raises Oversight Questions

Market participants have expressed concern over the rapid issuance of licences, particularly when it comes to jurisdictions that appeared to finalise authorisations ahead of the full enforcement of EU-level requirements. These early approvals, critics argue, can compromise the integrity of cross-border compliance and investor protection standards.

France’s financial regulator has highlighted the issue publicly, indicating that some market entries via the MiCA “passport” appear to have received minimal scrutiny. Such dynamics not only create competitive imbalances but could also introduce vulnerabilities into the broader financial system.

Regulatory Trust and Market Perception

Though the MiCA framework is intended to enhance the credibility of the digital asset space, the varying interpretations and enforcement levels undermine this objective. Market observers stress that consistency in applying due diligence criteria is vital for fostering long-term stability and trust in the EU's digital finance sector.

The divergence in national approaches could also influence how companies are perceived by stakeholders. Market confidence may become closely tied not only to whether a firm a MiCA licence but also to where that licence was issued.

Regional Strategy Among Crypto Firms

With the MiCA regulation providing a single entry point to the EU market, service providers may be adopting a jurisdictional strategy—selecting licensing locations based on expediency rather than compliance robustness. This creates a regulatory arbitrage effect, wherein firms benefit from weaker national enforcement while gaining access to stronger markets.

Authorities across major economies within the bloc have begun raising the issue at national and EU forums, aiming to prompt reviews and possible recalibrations of the enforcement process. Harmonising not just the regulation but also its practical application remains a key challenge for policymakers.

Call for Standardised Enforcement

The EU's ambition to become a leader in crypto regulation hinges on aligning implementation as closely as possible across member states. Discrepancies risk enabling entities to operate with uneven standards, potentially weakening the overall objective of the regulation.

As scrutiny increases, especially in the financial capitals governed under indices such as the ftse and FTSE AIM UK 50 INDEX, regulatory authorities may face mounting pressure to tighten supervision and ensure that licensing reflects not just procedural compliance but substantive regulatory integrity.