We recently wrote about how the United Kingdom and the United States jointly launched the Transatlantic Task Force for Markets of the Future and how it had the potential to reshape the global regulatory landscape for digital assets. We wondered about how the EU might respond. Verena Ross, Chair of the European Securities and Markets Authority (ESMA), recently made headlines in an interview with the Financial Times by confirming that the European Commission is drafting plans to shift supervision of several financial sectors—including cryptocurrency—from national regulators to ESMA. This regulatory overhaul, were it to happen, would mark a pivotal moment in the evolution of European financial oversight, particularly in the context of the EU’s landmark Markets in Crypto-Assets (MiCA) framework. See post here.
Currently, under MiCA, crypto-asset service providers (CASPs) are licensed and supervised by national authorities. This decentralized model has led to a patchwork of regulatory standards across the EU’s 27 member states. While MiCA was designed to harmonize rules for digital assets, the implementation has been anything but uniform. Each country has had to build its own regulatory infrastructure, leading to duplication of efforts, inconsistent enforcement, and regulatory arbitrage. Ross highlighted this inefficiency, noting that “specific new resources had to be built up 27 times, once in each member state,” a process she argues could have been streamlined at the European level.
The European Commission’s proposal to centralize supervision under ESMA aims to address these inefficiencies and create a more integrated and globally competitive capital market. There are a number of potential benefits. Centralized oversight could ensure consistent application of rules and standards across all member states, leading to a more level playing field. By addressing gaps in oversight stemming from fragmented supervision, ESMA could offer more robust protection for EU investors. Consolidating resources and expertise at a European level could be more efficient than each national authority building up capabilities independently. And, centralizing oversight could also enhance consumer protection and investor confidence.
If ESMA assumes direct supervisory authority, crypto firms operating across borders may face stricter scrutiny and longer licensing processes. This could reduce “forum shopping,” where companies choose jurisdictions with the most lenient regulatory environments. While this may increase compliance costs, it could also level the playing field and improve market integrity. Moreover, ESMA’s involvement could bring greater clarity and consistency to the application of MiCA, which has been a major concern for industry stakeholders.
Despite the potential benefits, the proposed shift is not without its critics. Some smaller EU nations, particularly those with established financial services sectors like Luxembourg, Ireland, and Malta, are reportedly resistant to the move. Claude Marx, head of Luxembourg’s financial regulator, even warned that ESMA could become a regulatory “monster” if given too much authority. Malta has firmly rejected the idea, arguing that centralized oversight would be premature given MiCA’s recent implementation, introduce unnecessary bureaucracy, reduce efficiency, and potentially harm the EU’s attractiveness as a crypto hub. There are also logistical considerations, as ESMA would require significant scaling of internal operations, recruitment of specialized expertise, and development of robust monitoring systems to effectively manage an expanded supervisory remit.
This tension reflects a broader debate within the EU about balancing national sovereignty with the need for unified regulation. A possible compromise could involve ESMA overseeing large, cross-border entities while leaving domestic-only firms under national supervision—a model already used in banking regulation.  Regardless, the comments from Verena Ross and other EU officials suggest a clear intent to move towards a more centralized and streamlined approach to financial supervision, especially in rapidly evolving sectors like crypto assets.
As of now, there is no set timeline for a formal legislative draft, much less implementation, for this suggested shift of supervisory power to ESMA. And any final decision will likely involve negotiations and potential legislative approval. In the interim, national regulators remain the primary overseers of the digital asset market within their respective jurisdictions.
