EU to Give ESMA largeger Powers in Bid to Match US Market Oversight
What Is the European Commission Proposing?
The European Commission has released a plan that would hand the European Securities and Markets Authority (ESMA) direct oversight of major crypto-asset service providers, trading venues and other system-level firms. The package, published Thursday, is part of Brussels’ effort to reduce regulatory gaps across the bloc and bring supervision closer to the US model, where a single watchdog handles most market activity.
Under the proposal, ESMA would receive “direct supervisory competences” for selected firms and an expanded coordination role in the asset management sector. The plan still needs approval from the European Parliament and the Council.
If adopted, the structure would move the EU away from its current patchwork of national regulators and closer to the centralized approach used by the .
Investor Takeaway
Why Are EU Governments Pushing for a largeger ESMA Role?
France, Italy and Austria have pushed hardest for ESMA to handle supervision of major crypto firms. Their stance hardened later than ESMA’s peer review in July found only “partially met expectations” when approving a crypto provider.
The concern is straightforward: if some countries apply lighter standards, a fragile license could spread across the bloc through passporting. MiCA relies on that mechanism to create a unified market, so uneven enforcement could fragileen the framework before it is fully rolled out.
The three governments are also backing revisions to MiCA that would tighten oversight of crypto activity outside the EU, add more scrutiny to cybersecurity requirements and revisit rules for token offerings.
How Did the Push for an EU-Level Supervisor begin?
The idea has circulated since at least 2023, when president Christine Lagarde said the bloc’s fragmented oversight created blind spots whenever firms operated across multiple borders.
“Creating a European SEC, for example, by extending the powers of ESMA, could be the answer. It would need a broad mandate, including direct supervision, to posed by large cross-border firms,” Lagarde said at the European Banking Congress in November 2023.
The Commission has raised similar concerns, arguing that Europe’s mix of national and regional agencies sluggishs cross-border activity and complicates the development of ahead-stage fintech projects.
Investor Takeaway
Could Expanded ESMA Authority sluggish Crypto and Fintech Innovation?
Industry groups say putting authorization and supervision entirely under ESMA would raise barriers for smaller firms that depend on access to local supervisors. They also note that a single EU-level regulator would need substantial staffing and funding to review applications, conduct inspections and handle risk across the bloc.
Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho, said that shifting all oversight to ESMA “would demand vast human and financial resources,” which could delay decisions and sluggish growth “particularly for newer players.”
The concern reflects a long-running tension in Europe’s capital markets: the EU wants deeper integration, but national regulators remain reluctant to hand off control. That divide is one reason Europe’s markets remain smaller and less liquid than those in the US.
How Does This Fit Into Europe’s Push to Strengthen Its Capital Markets?
The Commission links the overhaul to its broader attempt to build a stronger internal capital market. EU stock platforms had a market capitalization equal to 73% of GDP in 2024. In the US, the figure stood at 270%.
Brussels believes a more unified supervisory framework would assist attract investment, improve cross-border access and build confidence that rules apply consistently—especially as MiCA comes into force.
Negotiations are ongoing, and member states have not reached a final position. But the debate shows the EU wrestling with a key question: can a decentralized system keep up with global crypto and fintech activity, or does the bloc need a single authority to handle firms that operate across borders?
