A controversial European Commission proposal could hand full supervisory powers to ESMA, sparking industry concerns over legal uncertainty, implementation delays, and weakened national oversight.
Brussels Moves to Centralize EU Crypto Supervision
The European Commission is drafting a sweeping reform of Europe’s crypto regulatory structure, seeking to shift supervisory authority from national regulators to the European Securities and Markets Authority (ESMA).
- The plan would undermine the existing MiCA framework, which was built around national licensing with EU-wide passporting.
- ESMA would gain direct oversight of all crypto firms operating across the bloc, signaling a major structural pivot.
This move, first reported by Bloomberg, comes as MiCA’s full implementation approaches in 2026—after years of member states building regulatory capacity.
MiCA’s National Regulator Model at Risk
Under the original Markets in Crypto-Assets (MiCA) framework, crypto firms must register with one national authority, after which they can operate throughout the EU via passporting rights.
- This decentralized model aimed to balance harmonization and proximity, enabling local regulators to supervise firms more effectively.
- The Commission’s new proposal would centralize that power in ESMA, potentially delegating some responsibilities back to national authorities, but largely diminishing their role.
The shift is being met with strong opposition from industry groups and policy experts.
Industry Pushback: “Disruptive, Untimely, and Risky”
Blockchain for Europe and other trade bodies argue that reopening MiCA now would destabilize Europe’s regulatory momentum.
“Reopening MiCA at this stage would introduce legal uncertainty, risk delaying the authorization process, and divert attention and resources from the practical task of consistent implementation,” said Robert Kopitsch, Secretary General of Blockchain for Europe.
- Kopitsch emphasized that national regulators are closer to firms, with tighter day-to-day engagement.
- A central authority like ESMA, he warned, could struggle with scalability and responsiveness without major resource expansion.
Andrew Whitworth, founder of Global Policy Ltd., echoed these concerns, noting that while a centralized system may work in theory, implementing it now could undermine the rollout of MiCA.
France Champions Central Oversight, Others Hesitate
France has been one of the loudest advocates for centralized crypto regulation, urging the EU to grant ESMA direct control over major crypto entities.
- François Villeroy de Galhau, Governor of the Bank of France, argued that passporting under the current system leaves room for regulatory arbitrage and inconsistent enforcement.
- He and others believe a unified approach would ensure greater market integrity and efficiency.
ESMA Chair Verena Ross has also suggested that centralized supervision could reduce fragmentation across the bloc, particularly with 27 national regulators preparing in parallel.
“Does it make more sense—for efficiency and for having the cross-border view—to do it in a central point?” Ross posed earlier this year.
ESMA’s Resource Challenge and Political Hurdles
Even if the proposal moves forward, ESMA faces significant operational barriers.
- Taking over supervisory duties for all EU crypto firms would require a massive increase in staffing, funding, and infrastructure.
- Critics argue that without concrete experience under MiCA, any centralization is premature and politically risky.
The proposal must still pass both the European Parliament and the Council, where member-state pushback is likely, especially from countries that have invested heavily in their own supervisory frameworks.
Recent Context: Malta’s Licensing Gaps Highlight Systemic Tensions
The debate over centralization intensified after ESMA’s July review flagged weaknesses in Malta’s crypto licensing regime.
- The Malta Financial Services Authority (MFSA) was found to only partially meet expectations, leaving key issues unaddressed.
- This review underscored the inconsistencies MiCA aimed to fix—but also highlighted why national authorities may need continued support, not replacement.
The EU Commission is pushing to give ESMA full oversight of crypto firms, replacing MiCA’s national regulator model. Industry leaders warn the move could cause legal uncertainty and disrupt MiCA’s rollout, while critics say ESMA lacks resources and proximity to firms to assume this role effectively.
