France May Block Crypto Licence Passporting Amid EU Regulatory Fight

France has raised alarm over what it sees as loopholes in the EU’s new crypto regulation, and now threatens to block licence “passporting” if firms licensed in other EU states operate domestically under weak oversight. The move marks a sharp escalation in the regulatory debate, with France urging more centralized supervision to ensure consistency, investor protection, and market stability.

Why Passporting Is So Controversial

Under the European Union’s MiCA (Markets in Crypto-Assets) framework, crypto firms can obtain a licence in one EU member state and then “passport” that licence to operate across all 27 member states. However, France’s financial regulator, the AMF (Autorité des marchés financiers), argues that some member states have lenient licensing and enforcement, effectively allowing firms to choose jurisdictions with weaker rules.

French watchdog president Marie-Anne Barbat-Layani called out this “regulatory shopping” as a growing concern. In her own words, France “does not exclude the possibility of refusing the EU passport,” describing the threat as an “atomic weapon” held in reserve.

Call for ESMA to Take Oversight

To address the inconsistencies, France, along with Italy’s Consob and Austria’s FMA, is pushing for key regulation powers to be transferred to ESMA (the European Securities and Markets Authority). Under their proposal, ESMA would take on greater responsibility for supervising major crypto firms rather than each national regulator acting independently under varying interpretations of MiCA. They say the first months since MiCA went into force have revealed “major differences” in how national authorities supervise crypto firms.

Impact on Crypto Firms and the Single Market

If France follows through and blocks some passported licences, crypto firms licensed in so-called “lighter” regimes might lose access to the French market. That may force firms to seek licensing in stronger, more regulated EU states or meet additional compliance burdens.

The threat of blocking passporting sends a signal of tightening regulatory discipline. Market participants, especially exchanges like Coinbase or Gemini, that operate across the EU via passporting, may now face legal challenges, additional costs, or uncertainty in market access. It could also lead to an uneven playing field if some countries enforce stricter rules and others stay more lenient.

For the EU’s single market, blocking passporting would be a severe measure—and controversial. It could raise legal and political questions about how much autonomy each member state retains versus how much central control ESMA should have. Some countries may resist giving up supervisory powers.

Pros and Cons

On the positive side, France’s stance may lead to stronger investor protection, more standardized regulation, and fewer cases of regulatory arbitrage. Firms licensed under rigorous supervision will gain credibility.

Moreover, centralizing oversight under ESMA for major players could make enforcement more coherent, reduce disputes about cross-border operations, and reduce the risk of market abuse or cyber vulnerabilities.

However, there are trade-offs. For smaller crypto firms, enhanced standards and stricter oversight may mean heavier regulatory burden and costs.

Risks for Innovation and Market Access

France’s threat to block passported licences could unintentionally stifle innovation. Firms based in smaller or earlier-adopter states may find it harder to scale. Moreover, a hostile regulatory environment might discourage new entrants or startups that rely on lower regulatory costs.

There is also the legal risk: using the “atomic weapon” of refusing passporting may lead to court challenges or clashes among EU institutions. It might strain relations between member states that see their own jurisdictions being labeled as “weak links.”

Outlook: What Comes Next

Over the coming months, the ball is likely in Europe’s lawmakers’ court. France, Italy, and Austria will push for amendments in MiCA, clarifications about ESMA’s powers, and more stringent cybersecurity and oversight rules.

Crypto firms will need to monitor regulatory shifts closely. Firms that currently rely on passporting may need to prepare for additional compliance demands or consider obtaining licences in stronger regulatory states.

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