The European Commission has introduced a regulatory package that would significantly expand the authority of the European Securities and Markets Authority over crypto firms and core market infrastructure. The proposal would shift direct supervisory responsibilities for crypto-asset service providers, trading venues, and central counterparties to ESMA.
This reflects efforts to align the EU’s oversight structure more closely with the centralized model used in the United States. The plan requires approval from the European Parliament and the Council before implementation.
The initiative comes amid growing political support for stronger bloc-level oversight. France, Austria, and Italy have all called for ESMA to oversee major crypto firms, citing concerns about uneven regulatory standards across member states.
Malta’s crypto licensing framework has drawn particular scrutiny after an ESMA peer review found the national regulator only partially met supervisory expectations. Differences in national approaches have also led to tensions around MiCA passporting, with France warning it may block licenses granted in jurisdictions perceived as more permissive.
Institutional Context and Market Implications
The proposal is part of a broader effort to streamline EU capital markets and strengthen institutional coordination. The Commission has emphasized that fragmented supervision limits cross-border activity and dampens competitiveness relative to the United States, where market capitalization stands at 270% of GDP compared with 73% in the EU.
The package builds on earlier calls from European Central Bank President Christine Lagarde, who in 2023 argued for a European SEC with direct supervisory powers to mitigate systemic risks posed by large cross-border financial firms.
Industry participants, however, warn that centralized supervision could slow innovation in crypto and fintech. Smaller firms often maintain close relationships with national regulators, which they say support faster decision-making and a more adaptive regulatory environment.
Consolidating authorization and oversight within ESMA would require substantial resources, raising concerns that processes could become more rigid and less responsive. These tensions highlight the challenge of balancing a unified regulatory framework with the flexibility needed to support early-stage companies in a rapidly developing market.
Competitive Outlook for EU Markets
The Commission maintains that a more integrated approach is necessary to deepen capital markets and enhance long-term competitiveness.
The proposal’s emphasis on cross-border consistency and supervisory strength reflects a broader push to modernize Europe’s financial architecture at a time when global competition in digital assets, market infrastructure, and financial services continues to intensify.
By addressing fragmentation, policymakers aim to build an environment better positioned to attract investment and support the growth of regulated digital asset markets.