A new European Commission plan to expand the powers of the European Securities and Markets Authority (ESMA) has sparked debate across the continent. The proposal aims to strengthen regulatory consistency between the crypto and financial markets. However, critics warn of a slowdown in innovation and a reduction in agility within Europe's growing fintech sector.
In brief
- The European Commission plans to give ESMA expanded powers over crypto companies to ensure consistent supervision across the EU.
- Critics warn that centralizing control could slow innovation and overburden regulators in the face of rapidly evolving fintech markets.
- Supporters argue that unified surveillance would strengthen cybersecurity, transparency and compliance across all EU member states.
- The EU faces a major choice: empower ESMA to ensure stability or preserve national flexibility to support fintech innovation and growth.
EU push for single crypto regulator raises concerns over market agility
The Commission is expected to publish a draft proposal in December extending ESMA's jurisdiction beyond financial securities and capital markets to include cryptocurrency service providers. Crucially, the plan would centralize supervision at the EU level, creating a system similar to that of the US Securities and Exchange Commission (SEC).
Under the Markets in Crypto-Assets Regulation (MiCA), which came into force in December 2024, crypto businesses licensed in one EU country can “bridge” their authorization to operate across all 27 member states. This system is considered a key competitive advantage for the European digital assets industry.
Industry leaders fear that ESMA's complete control will cause 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 companies.
[La supervision de l’ESMA] would likely slow down decision-making and innovation, particularly for new crypto players and fintech companies that rely on close collaboration with their national regulators.
Faustine Fleuret
Fleuret suggested a middle path in which ESMA would strengthen its supervision of national regulators instead of taking charge of all decisions. Granting ESMA the power to suspend or revoke licenses could improve accountability without removing local flexibility, she said.
Concerns also increased after the French securities regulator suggested banning crypto licensing “gateway” under MiCA. Fleuret warned that such a move would weaken one of Europe's main advantages in the global crypto market.
She maintained that the EU passport remains the cornerstone of MiCA and that removing it would deprive crypto businesses of the benefit of the single market that makes Europe competitive.
The ECB and experts call for unified crypto supervision under the aegis of ESMA
Some policy experts believe that expanding ESMA's powers could still bring positive changes if implemented cautiously. A strengthened regulator at EU level could help correct inconsistencies in the application of MiCA and the Digital Operational Resilience Act (DORA) between member states, thereby improving market confidence and resilience.
Dea Markova, director of policy at Fireblocks, said a unified supervisory approach could help manage operational risks and strengthen the stability of the digital asset system in Europe.
Key benefits of a unified supervision approach could include:
- Consistent supervisory standards across all EU member states.
- Better protection against cybersecurity and retention risks.
- Faster responses to cross-border compliance issues.
- A reduction in regulatory arbitrage between national authorities.
- Clearer accountability for enforcement and monitoring.
Markova noted that the success of this approach will depend on the structure of the plan and the level of funding provided to ESMA.
The President of the European Central Bank (ECB), Christine Lagarde, also expressed her support for a single body to supervise the crypto and financial markets. She believes that 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 guarantee of market stability or a brake on progress will determine the next chapter of EU crypto regulation.
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