France Pushes EU for Centralized Crypto Supervision

Speaking in Paris, Bank of France Governor François Villeroy de Galhau made a compelling case for transferring supervisory authority over large cryptocurrency companies from national regulators to ESMA. His central argument hinges on ensuring uniform application of crypto regulations across all 27 EU member states, preventing regulatory arbitrage where firms might exploit differing national standards. This move represents a significant challenge to the current Markets in Crypto-Assets (MiCA) framework’s ‘passporting’ system, which allows companies licensed in one member state to operate throughout the EU.

The French position reflects growing concern among European central bankers that the current system gives too much discretion to individual national regulators, potentially undermining oversight of fast-growing cross-border crypto players. This concern is shared by the Bank of Italy and the European Systemic Risk Board, both of which have called for tighter safeguards around cryptocurrency operations. The European Central Bank has also backed limits on tokens issued across multiple jurisdictions to maintain monetary control, creating a powerful coalition of central banking institutions advocating for stricter oversight.

At the core of France’s regulatory concerns lies the issue of stablecoin issuance and management. Governor Villeroy specifically targeted MiCA’s current allowance for ‘multi-issuance,’ where tokens like USD Coin (USDC) can exist both inside and outside the EU with separate reserves. He argued this arrangement creates systemic instability and increases European dependence on foreign currencies, particularly the U.S. dollar, potentially undermining the euro’s position in digital finance.

‘The framework needs stricter rules on multi-issuance to minimize arbitrage risks in times of market stress,’ Villeroy stated, highlighting how different reserve requirements across jurisdictions could create vulnerabilities during periods of market turbulence. This position puts France at odds with companies like Circle, the issuer of USDC, which obtained an electronic money license in France last year and operates under MiCA’s current model. The tension illustrates the broader challenge regulators face in balancing innovation with financial stability concerns.

Major trade associations have mounted significant opposition to France’s proposed changes, warning that altering MiCA’s carefully negotiated framework could have unintended consequences. In a joint letter, Blockchain for Europe, the Electronic Money Association, and the Digital Euro Association cautioned EU policymakers that reopening stablecoin issuance rules ‘risks Europe falling behind’ global competitors just as the region’s regulatory clarity begins attracting crypto businesses.

The industry groups argue that MiCA’s current provisions represent a hard-won compromise that provides necessary legal certainty for cryptocurrency operators. They contend that changing these rules now could undermine Europe’s competitive position relative to other jurisdictions like the United States and Asia, potentially driving innovation and investment away from the EU market. This debate occurs against a backdrop of increasing global competition for cryptocurrency dominance, with regulatory clarity emerging as a key factor in attracting blockchain businesses.

The outcome of this regulatory tug-of-war will have significant implications for how cryptocurrency businesses operate across Europe. While France and its central banking allies prioritize financial stability and uniform supervision, industry representatives emphasize the importance of regulatory predictability and global competitiveness. The resolution will likely shape Europe’s position in the global digital asset landscape for years to come, determining whether the region becomes a leader or laggard in cryptocurrency innovation and adoption.