Malta is mounting an unusually public fight against a European Union push to centralize crypto supervision, arguing the move would strip the island-nation of oversight over major digital-asset firms it helped attract and regulate, according to new reporting by Bloomberg. 

For months, Malta has opposed plans to place crypto supervision under the Paris-based European Securities and Markets Authority, or ESMA. If approved by EU leaders and the European Parliament, the proposal would require Malta to surrender direct supervision of large crypto firms including Crypto.com, Gemini, and Bitpanda, Bloomberg said. 

The clash has emerged as an early test of a broader EU campaign to centralize parts of financial-market oversight as officials seek to make investing safer and channel more household savings into capital markets. Malta, however, sees the effort as a politically driven challenge to its success in building a crypto industry, the report said. 

Malta became known as “blockchain island” after introducing a broad regulatory framework for blockchain and crypto businesses in 2018. That regime, combined with a tax policy that can allow some international companies based there to pay as little as 5 percent, helped the country attract crypto firms, the news outlet said.

When the EU later adopted its Markets in Crypto Assets framework, or MiCA, Malta moved quickly to preserve its advantage. Malta granted four of the first 15 MiCA licenses and now has 13 licensed crypto asset service providers, according to the report. Maltese officials say firms are drawn by a regulator with experience in crypto business models, technology, and risk. 

But Malta’s licensing approach has also come under scrutiny.

ESMA conducted a peer review of Malta’s decision to grant MiCA pre-authorization to a major crypto company later identified as OKX, shortly before the exchange agreed to pay $504 million in U.S. fines for running an unlicensed money-transmitting business. ESMA ultimately concluded that Malta’s regime was largely meeting expectations, but said the company’s past history had not been adequately considered and that Malta’s review should have been more thorough, Bloomberg said.

Supporters of centralization say a single EU supervisor would reduce fragmentation, improve consumer protection, and limit the risk of regulatory shopping by firms seeking the most favorable jurisdiction before operating across the bloc. Financial Commissioner Maria Luis Albuquerque told the news agency that crypto businesses are inherently cross-border and that supervisory expertise is specialized, scarce, and expensive, making a centralized hub more practical. 

Malta rejects that case. Kenneth Farrugia, chief executive of the Malta Financial Services Authority, told Bloomberg there was “nothing we are trying to fix,” while warning that more regulation could drive firms out of Europe altogether and toward markets such as Dubai, Abu Dhabi, Asia, and the United States. 

Read more at Bloomberg