ESMA warns of Malta's shortcomings in cryptocurrency licenses under MiCA

• ESMA criticizes Malta's granting of CASP licenses
• MiCA licensing requires stricter oversight
• Malta among leaders in crypto asset approvals in the EU

The European Securities and Markets Authority (ESMA) has issued a warning regarding the cryptocurrency licensing process conducted by the Malta Financial Services Authority (MFSA). Second report released on July 10, ESMA identified significant flaws in the authorization of a crypto asset service provider (CASP), casting doubt on the country's compliance with the MiCA regulation guidelines.

While the report acknowledges that Malta has sufficient technical resources and expertise, the review committee noted that the latest approval process ignored material risks and failed to require necessary corrections before granting the license. ESMA highlighted that more judicious use of the authorization phase could have prevented these flaws from becoming more prevalent.

Malta is one of the most active jurisdictions in the European Union in terms of CASP license issuance, with five approvals since the MiCA came into force. The country is behind only Germany and the Netherlands in this ranking. Even so, the European body questions the effectiveness of Maltese supervision and calls for greater rigor in compliance with regulatory requirements.

Data released by Circle executive Patrick Hansen indicates that 53 companies have already obtained MiCA licenses in the first six months of the regime. This means licensed companies can operate in all 30 countries of the European Economic Area without the need for additional approvals.

The ESMA report recommends that national regulators strengthen their review criteria, particularly in sensitive areas such as business model sustainability, governance, conflicts of interest, and information technology infrastructure. Sectors such as DeFi and Web3, which require more detailed monitoring, were also mentioned.

ESMA also suggested that regulators carefully evaluate the customer experience on licensed platforms, ensuring that risk alerts are clearly displayed and that the user journey complies with the standards established by MiCA.