Move Toward a Unified Capital Markets
The European Commission is preparing a December proposal to establish a single financial supervisor overseeing stock exchanges, crypto firms, and clearing houses across the European Union. The plan, modeled on the U.S. Securities and Exchange Commission (SEC), aims to unify fragmented oversight and reduce barriers to cross-border financial activity within the bloc.
According to the Financial Times, the proposal seeks to expand the powers of the European Securities and Markets Authority (ESMA) to supervise major cross-border entities, including stock and crypto exchanges.
The reform forms part of the EU’s “capital markets union” initiative, intended to make it easier for smaller financial startups to scale across member states. European Central Bank (ECB) President Christine Lagarde and former ECB head Mario Draghi both support the initiative.
Lagarde previously endorsed Germany’s proposal for a single European stock exchange, emphasizing that an SEC-style regulator could strengthen the region’s financial stability and competitiveness. “Creating a European SEC, for example, by extending ESMA’s powers, could be the answer,” Lagarde stated during the 2023 European Banking Congress.
However, not all member states agreed. Luxembourg and Dublin have reportedly expressed concern that a centralized regulator may overlook the interests of smaller financial hubs, favoring larger economies like France or Germany. These tensions show the political challenge of consolidating authority at the EU level.
ESMA’s Powers Over Crypto and Financial Markets
The Commission is expected to propose broadening ESMA’s jurisdiction to include stock and crypto exchanges, clearing houses, and asset managers operating across borders. As per the report, ESMA could gain final decision-making power in disputes between asset managers, issuing binding resolutions without direct national supervision.
The plan would also address regulatory gaps affecting crypto asset service providers under the EU’s Markets in Crypto-Assets (MiCA) framework. Under MiCA, firms licensed in one member state can operate across all 27 EU countries through a system known as “passporting.”
This system has drawn criticism from several regulators who fear that lenient national licensing may undermine EU-wide standards. France’s securities regulator recently threatened to block crypto license passporting, citing enforcement concerns.
France, Austria, and Italy have since called for ESMA to assume direct oversight of large crypto firms to ensure uniform supervision. ESMA chair Verena Ross confirmed in October that discussions were underway to move financial sector oversight from national agencies to the EU level.
Fragmentation and Boosting Market Efficiency
Currently, Europe’s financial system is divided among dozens of national regulators, creating inconsistent rules and higher operational costs. This fragmentation poses challenges for businesses that must comply with multiple regulatory regimes when operating across borders. The Commission’s upcoming proposal aims to streamline supervision, reduce compliance costs, and enhance investor protection across the EU’s capital markets.
Lagarde and EU finance ministers have already advanced related initiatives, including the roadmap for a digital euro and forthcoming proposals on tokenized real-world assets. These efforts align with the broader goal of modernizing Europe’s financial infrastructure and competing more effectively with the U.S.
If introduced in December, the proposal will undergo the standard legislative process involving the European Parliament and the Council. That process includes amendments and trilogue negotiations, which could extend discussions into 2026 before the framework takes effect.
Despite differing national interests, the Commission’s plan is a long-term effort to create a cohesive financial ecosystem across the bloc. By consolidating oversight under ESMA, the EU aims to simplify compliance for cross-border institutions while ensuring consistent enforcement of financial and crypto regulations.
Path Toward a More Integrated Financial Future
The European Commission’s initiative to expand ESMA’s authority is a key step toward unified supervision of stock and crypto markets. It seeks to eliminate overlapping national regulations, strengthen market integrity, and align Europe’s system with the SEC model in the United States.
The forthcoming draft proposal in December will determine the extent of ESMA’s expanded powers and influence the next phase of Europe’s financial governance. As discussions continue, the proposal is one of the EU’s most significant moves toward integrating its financial sector under a single, streamlined regulatory authority.