On September 15, 2025, France sent shockwaves through Europe’s crypto sector. French officials announced that they would oppose the EU’s “passporting” model for crypto licences. France argued that the system allows crypto firms to exploit loopholes and avoid strict oversight. Instead, Paris wants major crypto companies regulated directly by the European Securities and Markets Authority (ESMA).
This position sparked a fierce debate inside the European Union. It also raised big questions about the future of crypto regulation across the 27-member bloc.
This article breaks down what “passporting” means, why France wants to block it, how other countries are reacting, and what this means for crypto firms and investors.
What is Crypto “Passporting”?
In the EU, many industries already use a passporting system. Banks, insurance companies, and investment firms follow this model. Under passporting, a company can apply for a licence in one EU country. Once approved, the company can then operate across all member states without filing for new licences in each market.
When the EU introduced MiCA (Markets in Crypto-Assets Regulation) in 2023, lawmakers extended this system to crypto. That meant if a crypto exchange got a licence in, for example, Lithuania or Malta, it could operate across all of Europe.
For crypto startups, passporting looked like a dream. They could save time, cut legal costs, and expand faster. But for regulators in larger economies, passporting created new risks.
Why France Opposes Passporting
France believes passporting opens the door to regulatory arbitrage. Smaller states with lighter rules could become crypto hubs. Then, big firms could use those licences to sell services across Europe, including in markets with stricter standards like France, Germany, or Italy.
French officials argue that this practice could:
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Weaken investor protection. Citizens in one country could get exposed to risky firms approved under looser rules elsewhere.
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Undermine fair competition. Local firms that comply with tougher national rules would face unfair competition from firms licensed in easier jurisdictions.
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Increase systemic risk. A failure in one country’s oversight could spread across the EU.
France wants direct EU supervision for the largest crypto firms. That means ESMA, not national regulators, would issue and enforce licences. Paris believes this approach would prevent loopholes and create a level playing field.
Italy and Austria Join France
France is not alone. Reports show that Italy and Austria also support stronger centralised regulation. Both countries worry about the risks of letting smaller states act as “gateways” for giant crypto firms.
This coalition of three may gain momentum. Germany has not formally joined yet, but insiders say Berlin leans toward stricter oversight too. If these four economies align, they could drive major changes to how MiCA applies.
Crypto Firms Push Back
Crypto companies, however, strongly defend passporting. They argue that:
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Passporting fuels innovation. Startups can expand quickly without drowning in paperwork.
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The single market matters. The EU built its identity on open borders and common rules. Blocking passporting could slow integration.
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Regulation already exists. Firms must still meet MiCA standards, even in smaller states.
Executives fear that extra ESMA control would create heavier bureaucracy and slow approvals. Some also worry that stricter rules would drive business to friendlier jurisdictions outside the EU, like Switzerland, Dubai, or Singapore.
The Stakes for Europe
The debate goes beyond paperwork. It touches on the EU’s identity and its role in global finance.
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If passporting survives: Europe could remain one of the easiest regions for crypto startups to scale. The continent may attract talent and investment. But it risks weaker oversight and potential scandals.
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If passporting ends or limits increase: Europe could strengthen investor protections and trust. But the rules could slow innovation and push entrepreneurs abroad.
The decision also affects how the EU competes with the U.S. and Asia. The U.S. still debates crypto rules under the SEC and CFTC. Asia moves quickly, with countries like South Korea and Singapore setting clear frameworks. Europe wants to lead—but disagreements like this may slow progress.
ESMA’s Role
The European Securities and Markets Authority (ESMA) already plays a big role in supervising banks and stock markets. France wants ESMA to extend that role into crypto.
If ESMA becomes the direct regulator:
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Large crypto firms would deal with one EU-wide licence, issued at the central level.
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Small and medium firms might still use national licences.
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Enforcement would become stricter, since ESMA has more power and resources than many national watchdogs.
This model mirrors the European Central Bank’s role in banking. After the 2008 financial crisis, Europe gave the ECB power to supervise large banks directly. France argues that crypto deserves the same approach.
Investors React
Investors follow these debates closely because regulation shapes market confidence. On the day of France’s announcement, Bitcoin briefly dipped, but the overall market stayed stable. Analysts believe the issue will take months to resolve, so traders are not panicking yet.
Still, investors worry that a split EU stance could create uncertainty. Some funds may hesitate to expand into Europe until the rules become clearer. Others see opportunity: stricter oversight may weed out weak players and strengthen trust in regulated firms.
Industry Examples
Several crypto exchanges already use passporting. For example, Binance gained registration in France and other countries. Smaller hubs like Lithuania, Estonia, and Malta have licensed multiple firms that now operate across Europe.
If France blocks passporting, these firms may need to re-apply or face new ESMA reviews. That could delay expansion plans and raise compliance costs.
Political Dynamics
The debate also highlights political tensions inside the EU:
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Smaller states want to keep passporting because it helps them attract investment and jobs.
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Larger states want tighter control because they host bigger markets and face greater exposure to risks.
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The European Commission prefers harmony but must balance both sides.
The outcome may depend on negotiations over the next round of MiCA implementation rules, expected in late 2025.
Conclusion
France’s push against crypto passporting marks a turning point for Europe’s digital finance policy. Paris, backed by Italy and Austria, wants ESMA to regulate the largest crypto firms directly. They argue that this will protect investors, ensure fair competition, and prevent loopholes.
Crypto companies defend passporting as a key driver of innovation and integration. They warn that extra central control could push businesses out of Europe.
The final decision will shape whether Europe becomes a strict regulator or a flexible hub for crypto. Either way, the outcome of this fight will influence not just startups, but the future of finance in Europe.
Also Read – NFTs as securities under U.S. law
