EU criticises Malta over crypto regulation

The European Securities and Markets Authority (ESMA) has publicly criticized Malta’s approach to cryptocurrency regulation, pointing to significant shortcomings in the licensing process conducted by Malta’s Financial Services Authority (MFSA) under the EU’s Markets in Crypto-Assets Regulation (MiCA).

This criticism follows a detailed peer review launched in April 2025, which examined the authorization of crypto asset service providers (CASPs) in Malta, focusing on a specific license granted by MFSA.

ESMA found that while Malta demonstrated adequate supervisory resources and staffing, the MFSA only partially met expectations in its authorization procedures. Key concerns included an insufficient assessment of risks related to business growth, client onboarding, conflicts of interest, governance, IT infrastructure, and compliance with anti-money laundering and counter-terrorism financing requirements.

The regulator emphasized that Malta’s authorization process should have been more thorough and allowed sufficient time to properly evaluate compliance with MiCA’s standards.

This scrutiny comes more than a year after MiCA took effect in June 2024, marking the EU’s first comprehensive legal framework for crypto assets, which requires all crypto service providers to obtain licenses from national regulators to operate legally across the EU.

Malta, known for attracting crypto firms, has been accused of lax oversight, with ESMA urging the MFSA to reassess unresolved issues and improve supervisory convergence with other EU member states to ensure consistent regulatory enforcement.

The MFSA defended its licensing pace, denying any rush in granting licenses and highlighting its ongoing commitment to robust regulation. It also expressed pride in Malta’s early adoption of digital asset regulation and noted the strengths recognized in the ESMA report.

This episode underscores the EU’s push for tighter, harmonized crypto regulation and signals that Malta must enhance its scrutiny and supervisory practices to maintain credibility and investor protection in the rapidly evolving crypto sector.

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