EU Weighs Expanding ESMA's Authority to Oversee Crypto and Capital Markets

The European Commission is considering granting the European Securities and Markets Authority (ESMA) wider powers to directly supervise both cryptocurrency and traditional financial markets, in what could mark the bloc's biggest step yet toward a unified regulatory framework for digital assets. A draft proposal is expected to be published in December.

According to officials familiar with the plan, the proposal would allow ESMA to oversee crypto exchanges and service providers directly—mirroring the centralized model of the U.S. Securities and Exchange Commission (SEC). Currently, oversight of digital assets in the EU falls primarily under national regulators, coordinated through the Markets in Crypto-Assets Regulation (MiCA).

The move builds on ESMA's April 2025 guidelines, which urged national regulators to strengthen market abuse detection and enhance cross-border coordination under MiCA. Those guidelines were viewed as an initial step toward more consistent supervision across EU member states.

Under MiCA, crypto companies licensed in one EU country can operate throughout the bloc via a "passport" mechanism. While designed to streamline compliance and encourage innovation, the system has also exposed gaps in enforcement and raised concerns about uneven regulatory standards.

Some industry participants warn that transferring supervisory powers entirely to ESMA could slow the pace of innovation. Faustine Fleuret, from decentralized lending protocol Morpho, argued that such centralization "would demand vast human and financial resources," suggesting instead that ESMA should focus on strengthening its oversight of national regulators rather than replacing them.

These concerns follow France's indication in September that it may block automatic passporting of crypto licenses, citing enforcement inconsistencies. The move renewed debate over whether MiCA's implementation can truly deliver uniform standards across all 27 member states. Fleuret called the passport system "the cornerstone of EU financial regulations" and warned that excessive centralization could undermine Europe's competitiveness in digital finance.

Others view ESMA's potential empowerment as a necessary evolution. Dea Markova of digital asset custody platform Fireblocks said a single supervisory framework could "help address licensing, cybersecurity, and operational risks," though she cautioned that success would depend on adequate staffing and clear operational rules.

European Central Bank President Christine Lagarde has also voiced support for establishing a single EU supervisory authority, noting that a centralized structure could bring greater transparency and confidence to markets. Lagarde's stance aligns with a growing view in Brussels that fragmented national oversight may be ill-suited for the cross-border nature of digital assets.

If approved, the proposal would redefine the balance between EU and national regulatory powers—potentially transforming how digital assets are monitored and setting the stage for a more integrated approach to Europe's capital markets.