EU Crypto Oversight: ESMA Ready to Centralize Supervision

EU crypto oversight could shift to a single control. According to internal drafts, Brussels wants to entrust ESMA with the direct supervision of crypto service providers and the authorization of new enterprises. The measure would surpass the current national framework provided by MiCA.

EU: Why Push Towards Centralization of Crypto Businesses?

The European Commission aims to strengthen the role of the market regulator for the crypto industry within the bloc. The proposal would have the European Securities and Markets Authority (ESMA) oversee all operators active in the Union.

The change would mark a departure from years of work by national authorities and businesses. However, the goal is to standardize regulations and reduce regulatory arbitrage between countries.

How Would EU Crypto Oversight Change with ESMA?

The drafts circulated ahead of an announcement expected next month indicate ESMA as the direct supervisor of all crypto-asset service providers. Additionally, the Authority would assume the competence to authorize new activities in the sector.

Today, based on the MiCA approved in 2023, companies must obtain authorization in at least 1 member state to operate. That said, the proposal would transfer the authorization power to a central level, with a single instance.

Impact on National Authorities

The project could challenge the control structures established by individual supervisors. However, strong coordination with local regulators would remain essential for on-site supervision and rule enforcement.

Effects on Crypto Enterprises

For companies, a single European authorization could simplify market entry and reduce compliance costs. Additionally, centralized EU crypto supervision would decrease interpretative uncertainties and approval times, but would increase the intensity of controls. That said, centralizing the authorization of EU crypto providers would reduce procedural duplications, offering operational benefits but also more stringent requirements.

What are the next steps?

The plans are being finalized in Brussels and will be officially presented next month. Meanwhile, the EU crypto regulation under MiCA continues, focusing on licenses, transparency, and investor protection.

Overall, the reform could redefine EU crypto oversight, concentrating competencies within ESMA and altering the scope of MiCA. The impact on authorization timelines and the role of national supervisors remains to be assessed.