ESMA could gain direct supervision over crypto firms

The European Commission has proposed giving the European Securities and Markets Authority (ESMA) expanded powers to oversee crypto and broader financial markets, aiming to close the regulatory gap with the United States.

The plan would give ESMA direct supervision of crypto service providers, trading venues, and central counterparties, while boosting its role in asset management coordination. Approval from the European Parliament and the Council is still required.

Calls for stronger oversight have grown following concerns over lenient national regimes, including Malta’s crypto licensing system. France, Austria, and Italy have called for ESMA to directly oversee major crypto firms, with France threatening to block cross-border licence passporting.

Revisions to the Markets in Crypto-Assets Regulation (MiCA) are also under discussion, with proposals for stricter rules on offshore crypto activities, improved cybersecurity oversight, and tighter regulations for token offerings.

Experts warn that centralising ESMA supervision may slow innovation, especially for smaller crypto and fintech startups reliant on national regulators. ESMA would need significant resources for the expanded mandate, which could slow decision-making across the EU.

The proposal aims to boost EU capital market competitiveness and increase wealth for citizens. EU stock exchanges currently account for just 73% of the bloc’s GDP, compared with 270% in the US, highlighting the need for a more integrated regulatory framework.

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