European Commission Proposes Greater ESMA Authority
According to a European Commission report, it seeks to significantly expand the powers of the European Securities and Markets Authority (ESMA). This would include supervising cryptocurrency exchanges and capital markets directly, creating a single regulator similar to the U.S. Securities and Exchange Commission (SEC). A draft of the plan is expected in December.
Currently, the Markets in Crypto-Assets Regulation (MiCA) allows crypto service providers authorized in one EU country to “passport” their licenses across all 27 member states. MiCA ensures that crypto service providers can operate in multiple EU jurisdictions efficiently.
Industry Warns of Potential Innovation Slowdown
Critics argue that centralized decision-making in Brussels could hamper innovation in the crypto and fintech sectors. Faustine Fleuret, head of public affairs at Morpho, flagged the risks involved.
Shifting full authorization and supervision to ESMA would require massive costs and resources, slowing down decision-making, especially for new crypto and fintech enterprises that rely on collaboration with domestic supervisors.
Fleuret suggested that it would be preferable to strengthen ESMA’s oversight of national regulators, with powers to suspend or withdraw licenses, rather than centralizing all decisions.
France’s security regulators threatened to block passporting this year, revealing gaps in the EU MiCA framework. Fleuret added that the EU passport is foundational to financial regulation, and without it, crypto firms could lose one of the EU’s main competitive advantages.
Also Read : Senator Thom Tillis Warns U.S. Congress Is Running Out of Time to Pass Crypto Laws
Experts See Opportunities in Centralized Oversight
Despite concerns, some see expanded ESMA powers as a mature step in EU regulation. Dea Markova, policy director at Fireblocks, said centralization could improve licensing, cybersecurity, and custody standards across the EU.
Markova noted:
“Further standard-setting and guidance would be useful to address operational risks in custody, and it can also be extended to other areas of MiCA and DORA through supervisory convergence or a single EU supervisor.”
She emphasized that success depends on implementation and resourcing to make centralized supervision effective.
Christine Lagarde, President of the European Central Bank (ECB), also supported a single EU supervisor akin to the US SEC, as stated during the 2023 European Banking Congress.
