New Landscape of European Encryption Regulation: Controversy Arises Over Malta's MiCA Fast Track

The EU's regulation on the encryption asset market, ( MiCA, came into effect just a few weeks ago, and the small southern European country of Malta has become a popular choice for crypto giants looking to establish a presence in Europe. This island nation with a population of 500,000 has issued MiCA licenses to several top exchanges, allowing licensed enterprises to operate freely across the 30 countries in the European Economic Area. However, Malta's rapid implementation of MiCA has also sparked considerable controversy.

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

However, while Malta's ability to quickly adapt to regulatory changes provides convenience for businesses, it has also raised questions about the substance of its regulation. Some experts point out that smaller jurisdictions can indeed adapt more quickly to regulatory changes, but they question whether the rapid approval is accompanied by corresponding law enforcement capabilities. They emphasize that a continuous regulatory mechanism and a professional encryption law enforcement team are key.

At the same time, some professionals in the encryption industry believe that Malta's familiarity with digital asset regulation is its core competitive advantage. They point out that companies need professional and coherent regulation, which countries that have newly implemented MiCA may not necessarily possess.

However, some have questioned Malta's rapid approval process. Industry insiders have pointed out that MiCA approvals should not be as casual as fast food, and the case of a certain exchange being approved in four days precisely illustrates the issue.

It is worth noting that some leading exchanges obtained MiCA pre-authorization through rapid approval in Malta. However, one company reached a substantial settlement with the U.S. Department of Justice shortly after obtaining pre-authorization due to accusations of operating without a license. Maltese regulators stated that they adopt a risk-oriented approval principle, emphasizing "a prudent assessment based on the information available at the time, balancing efficiency and risk."

In contrast to Malta, countries like France have a strict attitude. French regulators warn of the "fast-food" approval risk of MiCA, calling for stronger coordination of the European Securities and Markets Authority )ESMA( to prevent companies from choosing the most lenient approval locations.

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, the actual implementation remains inconsistent. This regulatory disparity has led to a clear preference for companies: France has only approved 3 encryption asset service providers )CASP(, and its stringent standards have caused some large exchanges to abandon the French market.

Currently, EU regulators are reviewing Malta. According to reports, after a hack at a certain exchange, multiple national regulators urged ESMA to investigate the related exchange and review Malta's approval process. There are reports that ESMA has initiated a "peer review" of a member state with lenient regulations.

This series of controversies reflects the fundamental contradiction in the EU's implementation of MiCA: the issue of balancing regulatory centralization with member state autonomy. Some experts have raised key questions: Should the EU opt for a federal centralized decision-making process to counterbalance China and the US, or maintain decentralization to respect the professional advantages of each country?

Encryption companies face the dilemma of inconsistent MiCA implementation standards across countries. Some exchanges emphasize that the licenses obtained in certain countries are formal licenses that take effect immediately, rather than "principle approvals" issued by certain jurisdictions. This raises questions about the equivalence of licenses.

Apart from regulatory disputes, Malta has also engaged in judicial confrontation with the European Commission over its "Investment Citizenship Program." The European Court of Justice recently 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.

Although the "Golden Visa" is not directly related to encryption regulation, there are similarities in the model of attracting rich individuals and encryption giants in Malta. Experts point out that there are arbitrage opportunities within the European regulatory system, allowing companies to choose their paths easily. If companies flock to Malta due to delays in approval from certain countries, it indicates that the EU has not yet established an effective regulatory system for formal trading institutions.