EU Proposal to Centralize Crypto and Fintech Licensing Under ESMA Sparks Industry Concerns
Summary:
The European Commission has proposed expanding the European Securities and Markets Authority’s (ESMA) powers to oversee crypto-asset service providers (CASPs), trading venues, and central counterparties. While aimed at harmonizing supervision across EU member states, industry experts warn this centralization could slow licensing processes and stifle innovation in Europe’s crypto and fintech sectors. The move mirrors the US SEC’s centralized model and forms part of broader efforts to make EU capital markets more competitive with the US.
What This Means for You:
- Slower market entry: Crypto startups may face extended licensing timelines as ESMA assumes both authorization and supervision roles
- Regulatory uncertainty: Firms should prepare for potential compliance shifts during the EU Parliament and Council negotiation period
- Competitive disadvantage: Smaller EU-based projects may struggle against better-resourced US counterparts if approval processes become bottlenecked
- Watch for amendments: The final implementation could differ significantly from current proposals – monitor parliamentary debates closely
Original Post:
The European Commission’s proposal to expand the powers of the European Securities and Markets Authority (ESMA) is raising concerns about the centralization of the bloc’s licensing regime, despite signaling deeper institutional ambitions for its capital markets structure.
On Thursday, the Commission published a package proposing to “direct supervisory competences” for key pieces of market infrastructure, including crypto-asset service providers (CASPs), trading venues and central counterparties to ESMA, Cointelegraph reported.
Concerningly, the ESMA’s jurisdiction would extend to both the supervision and licensing of all European crypto and financial technology (fintech) firms, potentially leading to slower licensing regimes and hindering startup development, according to Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho.
“I am even more concerned that the proposal makes ESMA responsible for both the authorisation and the supervision of CASPs, not only the supervision,” she told Cointelegraph.
The proposal still requires approval from the European Parliament and the Council, which are currently under negotiation.
If adopted, ESMA’s role in overseeing EU capital markets would more closely resemble the centralized framework of the US Securities and Exchange Commission, a concept first proposed by European Central Bank (ECB) President Christine Lagarde in 2023.
Related: Bank of America backs 1%–4% crypto allocation, opens door to Bitcoin ETFs
EU plan to centralize licensing under ESMA creates crypto and fintech slowdown concerns
The proposal to “centralize” this oversight under a single regulatory body seeks to address the differences in national supervisory practices and uneven licensing regimes, but risks slowing down overall crypto industry development, Elisenda Fabrega, general counsel at Brickken asset tokenization platform, told Cointelegraph.
“Without adequate resources, this mandate may become unmanageable, leading to delays or overly cautious assessments that could disproportionately affect smaller or innovative firms.”
“Ultimately, the effectiveness of this reform will depend less on its legal form and more on its institutional execution,” including ESMA’s operational capacity, independence and cooperation “channels” with member states, she said.
Related: Grayscale Chainlink ETF draws $41M on debut, but not ‘blockbuster’
The broader package aims to boost wealth creation for EU citizens by making the bloc’s capital markets more competitive with those of the US.
The US stock market is worth approximately $62 trillion, or 48% of the global equity market, while the EU stock market’s cumulative value sits around $11 trillion, representing 9% of the global share, according to data from Visual Capitalist.
Magazine: EU’s privacy-killing Chat Control bill delayed — but fight isn’t over
Extra Information:
ESMA Official Website – Details on the regulator’s current mandate and organizational structure
EU MiFID II Framework – Background on existing EU financial market regulations that may interact with new proposals
ECB Annual Reports – Provides context on Christine Lagarde’s vision for EU financial market integration
People Also Ask About:
- How does ESMA currently regulate crypto? ESMA currently provides guidance but national regulators handle licensing under MiCA framework.
- What’s the timeline for this proposal? Approval could take 12-18 months with potential amendments during parliamentary review.
- How will this affect existing crypto licenses? Grandfathering provisions are likely but operational requirements may change.
- What’s the US equivalent to ESMA? The SEC has similar centralized authority over securities markets and crypto assets.
- Can member states override ESMA decisions? Under current proposals, ESMA decisions would be binding across the EU.
Expert Opinion:
“This represents a fundamental shift in EU financial governance that could either create a more efficient single market or introduce new bureaucratic barriers,” says Dr. Elena Petrovic, Financial Regulation Fellow at the European Policy Centre. “The critical factor will be whether ESMA receives proportional funding and develops specialized crypto expertise before assuming these expanded responsibilities.”
Key Terms:
- EU crypto asset service provider (CASP) licensing requirements
- ESMA centralized supervision of digital assets
- Impact of MiCA regulation on fintech startups
- European Union crypto licensing slowdown risks
- Comparison between ESMA and SEC crypto oversight
- EU capital markets union reform package
- Blockchain startup regulatory hurdles in Europe
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