Key facts
- Malta's MFSA is exploring how to classify decentralization in DeFi for regulatory purposes.
- ESMA is reviewing Malta's fast-track crypto licensing process under the EU's MiCA regulation.
- Concerns were raised over Malta's approval of a crypto firm despite outstanding risks in governance and technology.
- ESMA is urging all EU regulators to apply uniform and robust scrutiny to Crypto Asset Service Providers.
- The review could lead to a more cautious and potentially delayed approach to crypto licensing across the EU.
The European Securities and Markets Authority (ESMA) has launched a formal review into Malta's process for authorizing crypto firms under the Markets in Crypto-Assets (MiCA) regulation. This action stems from concerns that Malta's financial watchdog, the MFSA, approved a crypto firm despite unresolved risk issues, including those related to governance, IT infrastructure, and business models.
ESMA's review highlights that while Malta's regulator has sufficient resources, its due diligence in key risk areas needed strengthening. The authority is now urging all national competent authorities across the EU to adopt more rigorous and uniform scrutiny for Crypto Asset Service Providers (CASPs). This includes a closer examination of decentralized products and cross-border operations.