Two local analysts have cautioned that any attempt by EU Member States to block or restrict the passporting of crypto-asset service providers (CASPs) authorised under the Markets in Crypto-Assets Regulation (MiCA) would face serious legal and procedural obstacles.
In their paper published this week on constitutionaldiscourse.com, Christopher P. Buttigieg,Chief Officer Supervision at the MFSA and Dr Ian Gauci, Managing Partner of GTG Law Firm, highlighted that any prohibition must be based on clear evidence of misconduct rather than mere suspicion.
MiCA’s Article 102 allows host regulators to block foreign CASPs, but only after notifying the provider’s home state and the European Securities and Markets Authority (ESMA), and after attempting less-restrictive measures first. Regulators must demonstrate that a ban is necessary, proportionate, and non-discriminatory, a standard similar to previous EU financial-services case law.
Last September, France had warned it may try to block some crypto firms licensed in other EU countries from operating domestically as part of a push to get oversight transferred to the bloc’s central securities regulator, amid concerns that under the EU’s new regulatory regime, crypto companies may be seeking out jurisdictions with more lenient licensing standards.
“This creates a high evidential bar for authorities,” the analysts said, noting that proof could include documented consumer complaints, misleading promotions, or evidence of market manipulation. The requirement for cross-border notification and consultation with ESMA further complicates swift action.
The implications are immediate for national authorities in fast-growing crypto markets, where regulators are under pressure to protect investors while allowing innovation.
In their paper, Dr Buttigieg and Dr Gauci called for coordinated guidance from ESMA to ensure consistent enforcement across member states.
“While Article 102 provides a tool for investor protection, procedural and evidential hurdles may limit its practical use, leaving some risky providers operating in a regulatory grey area.”
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