France has issued a stark warning that it may block the passporting rights of crypto firms across the European Union unless stronger safeguards are put in place to stop money laundering. Such a move would shake the foundations of the EU’s single market, but officials in Paris argue that the risks posed by inconsistent supervision under the Markets in Crypto-Assets (MiCA) regulation are too great to ignore. Without unified enforcement, criminals could exploit gaps in national licensing regimes, using weaker jurisdictions as gateways for illicit finance that then flows freely across Europe.

Money laundering risks under MiCA regulation

The issue is not just theoretical. MiCA was designed to harmonize rules across the 27-member bloc, yet its early application has exposed inconsistent licensing practices. In this fragmented environment, crypto firms can effectively “jurisdiction shop,” choosing member states where oversight is lighter, and then use those licences to passport across the EU. This is a serious vulnerability because once an entity is authorized in one country, its operations extend into the entire market. If the original licensing process is weak, the risks cascade everywhere. For money launderers, that kind of gap is a goldmine.

Money laundering risks tied to MiCA range from poor customer due diligence and ineffective transaction monitoring to inadequate suspicious activity reporting. Criminal organizations can exploit exchanges that lack robust controls, moving funds through multiple accounts and reintroducing them as legitimate capital. Without standardized enforcement, some jurisdictions may apply only minimal requirements, giving illicit actors the perfect cover. France’s warning is therefore as much about defending financial integrity as it is about asserting regulatory leadership.

Divergent licensing practices and financial crime exposure

The fragmentation of licensing under MiCA is already visible. While Luxembourg approved Coinbase and Malta licensed Gemini, France, Italy, and Austria have called for stricter scrutiny before authorization is granted. This divergence matters because it sets the stage for financial crime risks that are far larger than isolated lapses. Once a crypto firm secures a licence in one country, even if that country applies weaker standards, it gains broad access across the EU.

This phenomenon enables regulatory arbitrage, where firms deliberately establish themselves in jurisdictions with less demanding anti-money laundering (AML) checks. In practice, it means that a crypto platform with minimal beneficial ownership verification, loose customer onboarding, or weak suspicious activity reporting can still operate across Europe. Criminals can exploit such vulnerabilities by layering transactions across multiple platforms, obscuring the origin of illicit funds, and eventually reintegrating those funds into the traditional financial system.

France and its allies have argued that this creates an uneven playing field and exposes the EU to systemic risk. The loophole is particularly concerning for regulators trying to enforce the EU’s Anti-Money Laundering Directives. These directives emphasize uniformity and cross-border coordination, yet MiCA’s uneven implementation undermines that principle. Unless corrected, the framework may inadvertently serve as a blueprint for laundering, allowing bad actors to exploit precisely the differences it was supposed to eliminate.

Calls for ESMA oversight reflect the need for centralized enforcement. If the European Securities and Markets Authority were empowered to directly supervise crypto firms, then weak licensing at the national level would no longer create EU-wide exposure. A central body could enforce standardized due diligence, transaction monitoring, and suspicious activity reporting requirements. Without this, the EU risks becoming a patchwork system where criminals can pick their entry point based on where regulators look the other way.

Calls for stronger AML safeguards in MiCA

France, Italy, and Austria have not limited their criticism to licensing practices. They are pushing for a broader strengthening of MiCA, with explicit attention to AML safeguards. First, they argue for stronger restrictions on non-EU activities. Many crypto platforms operate globally, and their EU licence may be leveraged as a mark of credibility for operations in other jurisdictions with much looser controls. Limiting this would help prevent EU licensing from indirectly legitimizing higher-risk activities abroad.

Second, cybersecurity oversight is a crucial point. Weak cybersecurity is not just a technology issue but an AML problem. Hacks and breaches can allow criminals to manipulate transaction data, launder stolen funds, or mask illicit movements under technical noise. By imposing stronger cybersecurity requirements, regulators aim to close another door through which laundering can pass undetected.

Third, token issuance must be more tightly controlled. New token offerings can easily become vehicles for layering and integration, two core stages of the laundering process. Criminals can convert illicit funds into tokens, pass them through exchanges, and then cash out into fiat currencies, creating a trail that is difficult to unravel. Without stricter guardrails, token issuance becomes a perfect laundering tool disguised as innovation.

For regulators like France’s Autorité des Marchés Financiers, these measures are necessary to preserve the credibility of Europe’s financial system. Allowing one jurisdiction to set a low bar effectively lowers standards across the board. France’s threat to block licences from other states is therefore not an idle warning but a reflection of how seriously it views the laundering risk. The credibility of the EU’s financial oversight, investor protection, and compliance with global AML obligations are all at stake.

Broader implications for the fight against money laundering

The MiCA debate is about more than digital assets. It is about whether Europe can maintain the integrity of its single market while defending itself against financial crime. The ability to launder money through passported licences undermines trust in the system and invites exploitation by organized crime, terrorist financiers, and corrupt actors seeking safe passage for illicit funds.

France’s position highlights the tension between integration and security. Blocking licences from other member states would fracture the single market, but failing to act could turn the EU into a haven for laundering disguised as compliance. The choice facing the EU is therefore not simply administrative but existential. Will MiCA strengthen Europe’s AML framework, or will it expose it to new vulnerabilities that criminals can exploit at scale?

For now, the future of MiCA remains uncertain. ESMA has signaled openness to stronger oversight, but some member states resist ceding authority. As more crypto firms apply for licences, the risk of laundering through inconsistent regimes grows. Unless the EU aligns its regulatory approach, it risks undermining its global credibility in the fight against illicit finance. The ultimate test will be whether Europe prioritizes convenience for the crypto industry or resilience against money laundering. The outcome will define the reputation of MiCA, the EU’s financial system, and Europe’s role in the global fight against financial crime.

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Related Links

• European Securities and Markets Authority
• European Banking Authority
• European Commission MiCA Regulation
• Financial Action Task Force
• Autorité des Marchés Financiers

Other FinCrime Central Articles About MiCA

• The ESMA MiCA Rulebook: Professionalism and Protection for Crypto Investors
• ESMA Clarifies Stablecoin Custody and Transfer Rules under MiCA Regulation
• ESAs Set Clear Guidelines for Crypto-Asset Classification Under MiCAR

Source: Coin Edition

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

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