EU Crypto Assets Regulation Controversy: Malta's MiCA Fast Track Raises Questions

Only a few weeks after the implementation of the EU Crypto Assets Market (MiCA) regulations, Malta has become a popular choice for crypto giants looking to establish a presence in Europe. This southern European island has rapidly issued licenses to several well-known trading platforms, allowing licensed companies to operate freely in the 30-country economic area. However, Malta's quick approval process has raised industry concerns about the stringency of its regulations.

The "Virtual Financial Assets Act" introduced in Malta in 2018 (VFA) laid the foundation for its smooth transition to the MiCA framework. This framework stipulates that companies holding a VFA license can enjoy a fast track and pre-authorization eligibility under MiCA before December 30, 2024. Regulatory authorities stated that a mature local system helps existing enterprises accelerate their approval process.

However, while Malta's ability to rapidly adapt to regulatory changes provides convenience for businesses, it has also raised concerns about the substance of its regulation. Liat Shetret, Vice President of Elliptic, pointed out that small jurisdictions can indeed adapt to regulatory changes more quickly, but questioned whether the fast approvals are accompanied by the necessary enforcement capabilities. She emphasized that ongoing regulatory mechanisms and professional encryption enforcement teams are the key.

Przemysław Kral, the CEO of Poland's largest exchange Zondacrypto, used the analogy of "fast food versus Michelin restaurants" to explain his decision to abandon Malta in favor of Estonia, which has stricter regulations. He stated plainly: "MiCA approvals should not be as casual as ordering fast food."

Some leading trading platforms have obtained MiCA pre-authorization through Malta's fast approval process. However, one of the platforms reached a settlement agreement of $500 million with the U.S. Department of Justice shortly after obtaining the pre-authorization due to issues such as operating without a license. The Maltese regulatory authorities responded by stating that they adopted a risk-oriented approval principle, emphasizing "a prudent assessment based on the information available at the time, balancing efficiency and risk."

French regulators have warned of the "fast food" approval risk for MiCA. The president of the French Financial Markets Authority (AMF) pointed out that some rapidly approved products may lower regulatory standards and called for stronger coordination from the European Securities and Markets Authority (ESMA) to prevent companies from choosing the least stringent approval location.

The authorization process of MiCA has transparency issues, with significant differences in approval standards among member states. Although ESMA and the European Banking Authority (EBA) have established a coordination mechanism, actual implementation remains inconsistent. French blockchain expert Arroche pointed out: "The French AMF strictly follows ESMA standards, while countries like Malta issue licenses even when technical details are incomplete, and even create a 'pre-approval' process not authorized by MiCA."

EU regulators are conducting a review of Malta. According to reports, following a hacker attack on a certain trading platform, multiple national regulators have urged ESMA to investigate the relevant platform and review Malta's approval process. There are indications that ESMA has initiated a "peer review" of a member state with lenient regulations.

Mark Foster, the EU policy head of the Crypto Innovation Committee, pointed out that France's objections to the fast-track approval model reflect the fundamental contradiction in the EU's implementation of MiCA: the balance between regulatory centralization and member state autonomy. He raised a key question: "Should the EU choose a federal centralized decision-making approach to counterbalance China and the US, or maintain decentralization and respect the professional advantages of each country?"

Crypto enterprises are facing the dilemma of inconsistent MiCA implementation standards across different countries. Some trading platforms have specifically highlighted that the licenses obtained from certain countries are "official licenses that take effect immediately, as opposed to 'principle approvals' issued by certain jurisdictions," implying doubts about the equivalence of the licenses.

In addition to the controversy over regulatory centralization, Malta has recently encountered judicial confrontation with the European Commission over its "citizenship by investment program." The European Court of Justice ruled that the country’s "golden visa" program, which sells EU citizenship to investors, is illegal. The European Commission pointed out that the program opens the door to money laundering, tax evasion, and corruption.

An anonymous compliance expert who previously served multiple Crypto Assets service providers (CASP) stated: "There are arbitrage opportunities in the European regulatory system, and companies can choose to act accordingly. If they flock to Malta due to slow approvals in other countries, it indicates that we have failed to establish an effective system for legitimate trading institutions."