The European Union (EU) is reportedly planning to shift oversight power of key financial market areas, including crypto, from national authorities to a centralized supervisory authority to help boost the bloc’s capital markets and harmonize regulation.
EU Eyes Centralized Crypto Market Oversight
On Monday, Verena Ross, chair of the European Securities and Markets Authority (ESMA), affirmed that the regulation of stock exchanges, crypto companies, and clearing houses in the EU will likely be transferred to the bloc’s market watchdog.
Ross told the Financial Times that the European Commission is preparing new rules that would shift the supervision of several areas of EU financial markets from national authorities to ESMA, to push for “a capital market in Europe that is more integrated and globally competitive.”
Last month, the EU commissioner for financial services, Maria Luís Albuquerque, shared they were “considering a proposal to transfer supervisory powers to Esma for the most significant cross-border entities,” including crypto companies.
“All of this would imply changes to the governance and decision-making processes of Esma, and we have various models to consider based on other existing models of centralised supervision,” said Albuquerque.
The change aims to address the continued fragmentation in markets to “create more of a single market for capital in Europe,” the ESMA chair stated, arguing that “while we are doing a lot of work to try to make sure the implementation of MiCA is aligned, it clearly takes a lot of effort from us and the national supervisors to achieve that.”
“It also means that people had to build up specific new resources and expertise 27 times in different national supervisors, which could have been done more efficiently once at a European level,” she added.
Single Supervisor Proposal Faces Backlash
Notably, the EU first proposed making ESMA the main supervisory agency of Crypto Asset Service Providers (CASP) during the development of its Markets in Crypto-Assets Regulation (MiCA).
The plan received backlash from smaller EU nations, such as Luxembourg, Ireland, and Malta, which criticized the watchdog’s ability to oversee the fast-growing crypto market and feared it could undermine their flourishing financial sectors.
As a result, the supervision of these markets was left in the hands of the 27 national authorities, which Ross considers has created inefficiencies. She explained that the Paris-based authority has “tried for quite some time with the capital markets union and other initiatives to build a more effective capital market,” but “the reality has been that it is not easy to do given we have very different market structures.”
In July, ESMA raised concerns about Malta’s process for approving pan-EU licenses for crypto companies, arguing that “some risk areas were not adequately assessed during the authorisation process.”
As reported by Bitcoinist, the bloc watchdog’s Peer Review Committee (PRC) conducted a review of Malta’s Financial Services Authority (MFSA) CASP authorization process, finding the national regulator only “partially met expectations,” despite having adequate staffing and technical infrastructure.
At the time, ESMA stressed that the concerns extended beyond Malta and urged all EU competent authorities to align their oversight mechanisms to ensure consistency under MiCA’s regulatory regime.
Last year, former European Central Bank President Mario Draghi identified transforming ESMA into a single common regulator for all the bloc’s securities markets, similar to the US Securities and Exchange Commission (SEC), as a “key pillar” to boost European capital markets.
Since then, the European watchdog has been granted greater powers. The regulator will oversee new providers of consolidated tapes for equity and bond prices, and agencies that provide environmental, social, and governance ratings starting in 2026.
However, Claude Marx, Director General of Luxembourg’s financial watchdog, considers that a single financial regulator would turn into a “monster.” “It is a fantasy that the European Commission wants to push a single supervisor,” Marx stated in June.
“The European Commission has always stated they do not have an idée fixe to have a European SEC,” he argued, adding that there remain several barriers to providing financial services across European borders.
