According to Cointelegraph, the European Commission's initiative to broaden the European Securities and Markets Authority's (ESMA) jurisdiction over cryptocurrency and capital markets has ignited discussions across Europe. Critics argue that this move could hinder innovation and delay decision-making processes. The European Union is contemplating granting ESMA direct supervisory powers over stock exchanges and crypto service providers, potentially establishing a centralized regulatory framework akin to the U.S. Securities and Exchange Commission (SEC). A draft of this plan is anticipated to be released in December.
The existing Markets in Crypto-Assets Regulation (MiCA), effective since December 2024, allows crypto asset service providers authorized in one EU member state to "passport" their licenses across the 27-nation bloc. However, industry leaders caution that empowering ESMA might impede innovation, especially among crypto and fintech companies. Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho, expressed concerns that centralizing authorization and supervision within ESMA would require substantial human and financial resources, potentially slowing decision-making and innovation. Fleuret advocates for a balanced approach, suggesting that ESMA should have enhanced oversight powers over national regulators, such as the ability to suspend or revoke licenses, rather than centralizing all decision-making in Brussels.
In September, France's securities regulator threatened to prohibit crypto license "passporting" under the MiCA regime, raising concerns about enforcement gaps within the EU-wide regulatory framework. Fleuret emphasized that the EU passport is crucial to EU financial regulations, including MiCA, and jeopardizing it would deprive crypto market players of Europe's competitive advantage. Meanwhile, other policy experts view ESMA's expanding jurisdiction as a positive step towards crypto regulatory maturity in the EU. Dea Markova, director of policy at digital asset custody platform Fireblocks, believes that centralizing control and standards across EU member states could address pressing concerns related to MiCA, such as licensing, cybersecurity, and custodial risks. Markova highlighted the need for more standard-setting and guidance to tackle risks stemming from operational resilience of the custody function, suggesting that supervisory convergence could benefit other areas of MiCA and the Digital Operational Resilience Act (DORA).
Markova also noted that the success of centralized supervision would depend on the implementation and resources allocated to the plan. The concept of creating a single supervisory body, similar to the SEC, received backing from European Central Bank (ECB) President Christine Lagarde, who expressed support during the European Banking Congress in November 2023.
Catherine
