Europe’s crypto-asset regulatory framework is entering a new phase of scrutiny as policymakers consider whether enforcement of market-in-crypto-asset (MiCA) regulations should be left to national authorities or centralized under the European Securities and Markets Authority (ESMA).
MiCA will almost come into force in early 2025 and is designed to create a uniform rulebook for crypto asset service providers across the European Union.
However, as implementation progresses, disparities between member states are becoming harder to ignore. Some regulators have approved dozens of licenses, while others have issued only a small number, raising concerns about inconsistent oversight and regulatory arbitrage.
In this week’s episode of Byte-Sized Insight, Cointelegraph sat down with Lewin Behnke, chief strategy officer at Crypto Finance Group, a Swiss-based digital asset firm with operations across the EU, to explore what these growing pains mean for the European crypto market.
Uneven enforcement fuels calls for oversight
According to Behnke, the central challenge facing Europe lies not in the MiCA framework itself, but in how it is applied differently across jurisdictions.
“The application of regulations is very uneven,” he said, pointing to sharp contrasts between member states. For example, Germany has already granted around 30 crypto licenses, many to established banks, while Luxembourg has approved only three, all to large, well-known companies.
ESMA has published a peer review of the Malta Financial Services Authority’s licensing of virtual currency service providers, finding that the regulator has only “partially met expectations”.
These disparities have helped fuel support among some regulators and policymakers for devolving supervisory authority to ESMA, which would create a more centralized enforcement model similar to the U.S. Securities and Exchange Commission.
Related: Italy sets strict MiCA deadline for crypto platforms to comply with
France, Austria and Italy have all expressed support for the move, particularly amid criticism of more permissive regimes in other regions.
From Behnke’s perspective, centralization can be less about control and more about efficiency.
“From a purely practical point of view, I think it is a good idea to apply the regulations uniformly,” he said, adding that direct engagement with ESMA could reduce delays caused by back-and-forth between national authorities.
MiCA’s design is praised, but technical questions remain
Despite criticism from some in the crypto industry, Behnke said MiCA’s overall structure is sound, with a particular focus on regulating intermediaries rather than peer-to-peer activities.
“I like the MiCA regulation…the comprehensive approach of regulating custodians and those providing services, not necessarily assets or peer-to-peer usage…it’s the right approach.”
However, he also noted that unresolved technical issues have slowed implementation, especially for banks. One example is MiCA’s requirement that custodians be able to return customer assets “immediately,” although this language is still open to interpretation.
“Does that mean withdrawing the cryptocurrencies? Or is it enough to sell the cryptocurrencies and immediately withdraw the fiat currencies?” Behnke asked, noting that such ambiguities are still being resolved and are awaiting clarification from ESMA.
To hear the entire conversation on Byte-Sized Insight, listen to the entire episode on Cointelegraph’s podcast page, Apple Podcasts, or Spotify. Don’t forget to check out Cointelegraph’s full lineup of other shows.
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