The European Commission is proposing a significant overhaul of cryptocurrency regulation within the European Union, advocating for the European Securities and Markets Authority (ESMA) to take direct control over all crypto firms operating in the region. This initiative aims to replace the current model under the Markets in Crypto-Assets (MiCA) regulation, which requires crypto companies to obtain authorization from one EU member state before they can offer services across the bloc through a process known as “passporting.”
Under the Commission”s draft proposal, ESMA would assume the authority to approve new market entrants. Although it may delegate certain responsibilities back to national authorities, the overall effect would be a centralization of oversight, thereby diminishing the roles of national regulators. This shift comes as the implementation of MiCA is set to conclude next year, a process for which national regulators have invested significant time and resources.
Industry participants are expressing concerns regarding the implications of this centralized oversight. Robert Kopitsch, the secretary general of Blockchain for Europe, emphasized that reopening discussions on MiCA could result in legal uncertainties, potentially delaying the authorization process and diverting focus from consistent regulation implementation. He pointed out that national regulators maintain a closer connection with firms, a relationship that ESMA might struggle to replicate effectively.
Further concerns about the timing of this proposal have been echoed by Andrew Whitworth, founder of Global Policy Ltd. He suggested that while the market could theoretically serve as a testing ground for a centralized oversight model, transferring responsibilities to ESMA at this stage could lead to significant disruptions. He noted that ESMA would need a substantial expansion of resources to manage the workload currently handled by national regulators.
France has been a vocal advocate for increasing the powers of ESMA. Recently, officials from the country argued that granting ESMA direct oversight of major cryptocurrency firms would promote uniform supervision and enforcement throughout the EU, thereby minimizing risks associated with regulatory loopholes and inconsistent oversight across different jurisdictions. ESMA Chair Verena Ross has indicated that such centralized governance might ultimately be more efficient, especially considering the complexities involved in coordinating the regulatory efforts of 27 separate national authorities.
This proposal is still in draft form and is expected to be announced officially next month. It will require approval from both the European Parliament and the Council before it can be enacted. Neither the Commission nor ESMA has commented on the ongoing discussions surrounding this significant regulatory shift.
