The European Commission’s plan to expand the European Securities and Markets Authority’s (ESMA) powers over cryptocurrencies and capital markets has sparked debate across Europe, with critics warning it could stifle innovation and slow decision-making.
According to reports, the European Union is considering giving ESMA direct supervisory powers over stock exchanges and crypto service providers, potentially creating a centralized regulatory framework similar to the US Securities and Exchange Commission (SEC). The European Commission is expected to publish a draft plan in December.
Under the existing Cryptocurrency Market Regulation (MiCA), which came into force for cryptoasset service providers in December 2024, a company licensed in one EU member state can use its license as a “passport” to operate across the 27-nation bloc.
Industry warns of slowing innovation
But giving ESMA control risks slowing down innovation, especially among crypto and financial technology (fintech) companies, said Faustin Fleuret, head of communications at decentralized lending protocol Morpho.
“Fully centralizing authorization and oversight within ESMA will require significant human and financial resources,” she told Cointelegraph.
“[ESMA supervision] Decision-making and innovation are likely to be delayed, especially for new entrants such as crypto and fintech companies that rely on close collaboration with national regulators. ”
Fleuret said a more balanced approach would include giving ESMA greater supervisory powers over national regulators, including the power to suspend and revoke licenses, rather than centralizing all decision-making in Brussels.
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In September, France’s securities regulator threatened to ban the “passporting” of virtual currency licenses under the MiCA regime, raising concerns about enforcement gaps in the EU-wide regulatory framework.
“The EU passport is the cornerstone of EU financial regulation, including MiCA. Compromising it would mean depriving crypto market participants of the only competitive advantage Europe currently offers,” Fleuret said.
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Professionals seek balanced supervision
Other policy experts see the expansion of Paris-based ESMA’s jurisdiction as a promising sign for the maturation of crypto regulation in the EU.
Centralizing controls and standards across EU member states could address the most pressing concerns related to MiCA, such as licensing, cybersecurity and custody risks, said Dia Markova, director of policy at digital asset custody platform Fireblocks.
“At the principal level, we believe further standardization and guidance is needed to address the risks arising from the operational resiliency of custodial functions,” Malkova told Cointelegraph. “From this particular risk, we can infer that other areas of MiCA and DORA will be affected. [Digital Operational Resilience Act] They could benefit from supervisory consolidation, either through more guidance or through the creation of a single EU supervisor. ”
Markova warned that the success of centralized oversight will depend on how the plan is implemented and resources are committed.
The idea of creating a single supervisory authority similar to the SEC was also supported by European Central Bank (ECB) President Christine Lagarde, who expressed her support for the idea at the European Banking Conference in November 2023.
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