France’s warning that it may try to block cryptocurrency companies from operating in the country under licenses issued by other European Union member states — known as passporting — has raised questions about enforcement of the 27-nation bloc’s flagship crypto law.

France’s securities regulator, the Autorité des Marchés Financiers (AMF), is considering a ban on crypto firms operating in France under licenses obtained in other member states, Reuters reported Monday. The move reportedly stems from the AMF’s concern that some crypto companies seek licenses in more lenient EU jurisdictions.

The warning came less than a year after the EU’s Markets in Crypto-Assets Regulation (MiCA) took effect for crypto-asset service providers. MiCA was designed to create a harmonized framework across Europe and prevent the kind of regulatory arbitrage the AMF is flagging.

While some legal experts see this as going against MiCA regulations, other industry watchers say it is technically feasible.

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“MiCA was designed to create one harmonised framework and give firms access to a single regulated market across the EU. That promise is now under pressure,” said Marina Markezic, executive director of the European Crypto Initiative (EUCI). “From what we’ve seen, blocking passporting under MiCA is technically possible, though it comes with significant legal complexity.”

The recent position papers highlight “growing tensions over how MiCA should be enforced, with national authorities taking diverging views on key supervisory questions,” she added.

On Monday, France became the third country to call for the Paris-based European Securities and Markets Authority (ESMA) to take over supervision of major crypto companies, after Austria and Italy, according to a position paper seen by Reuters journalists.

Cointelegraph reached out to the ESMA but had not received a response by publication.

Some of these proposals “require legislative changes to MiCA itself,” which would “reopen political negotiations and potentially bring fresh uncertainty to the industry,” said Markezic.

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Blocking crypto license “passporting” goes against MiCA

Other legal experts see the AMF’s threat as legally unfeasible under the MiCA regime. “Legally, the AMF cannot block a duly MiCA-licensed entity from operating in France,” according to Edwin Mata, lawyer and co-founder and CEO of asset tokenization platform Brickken.

“The AMF can monitor conduct, raise supervisory concerns, and escalate cases to ESMA, but it cannot impose unilateral barriers,” for companies licensed under any member state, said Mata, adding:

“MiCA is a regulation, not a directive, which means it applies directly and uniformly across all Member States.”

The French security regulator’s messaging is more of a “warning” signaling that France will “will scrutinize whether firms are attempting to structure products under MiCA when they should in fact fall under MiFID II,” Mata said, referencing Europe’s Markets in Financial Instruments Directive II (MiFID II) framework for securities markets.

The main challenge for regulators is ensuring that crypto firms do not leverage the “lighter regimes” for financial instruments that should be classified as securities, added Mata.

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