A new European Commission plan to expand the powers of the European Securities and Markets Authority (ESMA) has stirred debate across the continent. The proposal aims to tighten regulatory consistency across crypto and financial markets. However, critics warn that the move could slow innovation and reduce agility within Europe’s growing fintech sector.
In brief
- •The European Commission plans to give ESMA broader powers over crypto firms to ensure consistent EU-wide supervision.
- •Critics warn that centralizing control could slow innovation and overburden regulators handling fast-evolving fintech markets.
- •Supporters argue unified oversight would strengthen cybersecurity, transparency, and compliance across all EU member states.
- •The EU faces a key choice: empower ESMA for stability or preserve national flexibility to support fintech innovation and growth.
EU’s Push for Single Crypto Supervisor Raises Questions Over Market Agility
The Commission is expected to publish a draft proposal in December extending ESMA’s jurisdiction beyond securities and capital markets to include cryptocurrency service providers. The plan would centralize supervision at the EU level, creating a system similar to that of the U.S. Securities and Exchange Commission (SEC).
Under the Markets in Crypto-Assets Regulation (MiCA), which took effect in December 2024, crypto companies licensed in one EU country can “passport” their authorization to operate across all 27 member states. This system has been viewed as a key competitive advantage for Europe’s digital asset industry.
Industry leaders fear that giving ESMA full control could create bureaucratic delays and discourage new entrants. Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho, warned that such centralization could overwhelm the regulator and slow progress for younger firms.
ESMA supervision would likely slow down decision-making and innovation, particularly for newer players in crypto and fintech companies who rely on close collaboration with their domestic regulators.
Faustine Fleuret
Fleuret suggested a middle path in which ESMA strengthens its oversight of national regulators instead of taking over all decision-making. In her view, granting ESMA the power to suspend or revoke licenses could improve accountability without removing local flexibility.
Concerns have also grown after France’s securities regulator suggested banning the “passporting” of crypto licenses under MiCA. Fleuret warned that such a move would undermine one of Europe’s main advantages in the global crypto market.
She maintained that the EU passport remains the foundation of MiCA and that removing it would deprive crypto businesses of the single market benefit that makes Europe competitive.
ECB and Policy Experts Back Unified EU Crypto Supervision Under ESMA
Some policy experts believe ESMA’s expanded powers could still bring positive change if implemented carefully. A stronger EU-level regulator could help fix inconsistencies in how MiCA and the Digital Operational Resilience Act (DORA) are applied across member states, improving overall market trust and resilience.
Dea Markova, director of policy at Fireblocks, said a unified supervisory approach could help address operational risks and strengthen the stability of Europe’s digital asset system.
Key advantages of a unified oversight approach include:
- •Consistent supervision standards across all EU member states.
- •Stronger protection against cybersecurity and custodial risks.
- •Faster responses to cross-border compliance issues.
- •Reduced regulatory arbitrage between national authorities.
- •Clearer accountability for enforcement and oversight.
Markova noted that the success of this approach will depend on the plan’s structure and the level of funding provided to ESMA.
European Central Bank (ECB) President Christine Lagarde has also voiced support for a single supervisory body for crypto and financial markets. She believes a unified approach could strengthen Europe’s position in global finance.
As Brussels prepares to finalize the proposal, the debate encapsulates Europe’s broader challenge: finding the right balance between innovation and control. Whether ESMA’s expanded role becomes a safeguard for market stability or a brake on progress will shape the next chapter of EU crypto regulation.