A Unified Regulatory Framework
The European Commission is actively developing a proposal that would centralize the oversight of both cryptocurrency and stock exchanges under a single, unified regulatory body. This initiative is designed to establish a supervisory structure that bears resemblance to the U.S. Securities and Exchange Commission. The information was detailed in a report by the Financial Times.
Expanding ESMA's Jurisdiction
Under this proposed framework, the European Securities and Markets Authority's (ESMA) jurisdiction would be significantly expanded. Its purview would extend to encompass stock exchanges, crypto exchanges, crypto asset service providers, and various other trading infrastructures. European Central Bank President Christine Lagarde has voiced her support for this initiative, viewing it as an essential progression towards achieving a unified capital markets union.
Addressing Regulatory Fragmentation
Currently, Europe's regulatory landscape is characterized by a multitude of national and regional agencies. This fragmentation leads to considerably higher operational costs for businesses engaging in cross-border activities. Furthermore, it has presented obstacles to the growth of startups across the region, as companies are required to navigate diverse approval processes to achieve scalability.
Lagarde's Vision for a European SEC
Christine Lagarde has previously articulated her belief that the creation of a European SEC, achieved by extending ESMA's existing powers, could offer a viable solution. She highlighted the importance of granting broad mandates, including direct supervisory authority, to effectively address systemic risks posed by large, cross-border financial firms. Sources close to the matter indicate that the commission intends to release a draft of this proposal in December.
Granting ESMA Final Authority
The proposed legislation would empower ESMA with final decision-making authority in disputes involving asset managers. This means ESMA would have the ability to issue binding decisions without requiring direct oversight from other bodies. This represents a substantial departure from the current system, where national regulators retain the primary responsibility for oversight.
France's securities regulator threatened to ban crypto license passporting under the Markets in Crypto-Assets Regulation regime in September. The move raised concerns about enforcement gaps in the EU-wide regulatory framework, as firms can currently use licenses from one member state to operate across all 27 nations.
Calls for Centralized Supervision
France has been among the nations advocating for ESMA to assume direct supervision of major crypto companies, joining Austria and Italy in this stance. Verena Ross, the Chair of ESMA, confirmed in October that the commission is indeed planning to transition the oversight of the financial sector from national regulators to ESMA, with the objective of mitigating ongoing market fragmentation.
Skepticism from Financial Hubs
However, Luxembourg and Ireland have expressed reservations regarding the concept of a single supervisor. Both nations, which are significant financial centers, have raised questions about whether the European Union would consistently act in the best interests of its smaller member states. Should the proposal gain approval in December, the subsequent legislative process is expected to continue into 2026.