To address these issues, regulators from Italy, France, and Austria have proposed amendments to MiCA to improve supervisory consistency and reduce enforcement gaps.

Stronger oversight by EU authorities like ESMA and EBA could impact cross-border passporting, licensing, and enforcement, influencing exchange listings, liquidity, and stablecoin regulation.

Authorities emphasize the need for ESMA to supervise major crypto service providers to ensure consistent enforcement and prevent regulatory arbitrage.

Recent peer reviews criticize Malta’s crypto authorization process, highlighting concerns about its robustness, especially since Malta hosts major exchanges like OKX, Crypto.com, and Gemini.

To improve security, regulators suggest requiring independent cybersecurity audits before and during licensing to boost investor confidence and mitigate cyber risks.

These regulatory proposals aim to strengthen investor protections, market integrity, and the EU’s global competitiveness in digital assets, aligning with international standards.

ESMA is expected to oversee the largest crypto exchanges, especially given that ten platforms handle 90% of transactions, and MiCA grants oversight powers over systemic stablecoins to the EBA.

Regulators also call for better supervision of platforms outside the EU targeting European investors and emphasize the importance of enhanced cyber risk regulation.

Since MiCA’s phased implementation began in mid-2024, around forty crypto service providers have received licenses across the EU, mainly from Germany and the Netherlands, with Malta issuing five.

European regulators from France, Austria, and Italy are urging the EU to strengthen oversight of crypto markets due to inconsistent enforcement of the MiCA legislation, which could pose risks to investors.

While MiCA aims to harmonize crypto regulations across the EU and facilitate passporting for licensed crypto service providers, individual countries still oversee implementation, leading to potential regulatory arbitrage.

They recommend clarifying the review process for white papers and establishing a centralized filing system for token offerings, excluding stablecoins, to enhance transparency and streamline oversight.

A key proposal includes granting ESMA direct supervision over major crypto platforms, closing offshore routing loopholes, requiring cybersecurity audits, and creating a centralized EU system for token white papers.