(Nov 14): The European Union’s (EU) executive arm is pressing for its markets regulator to get new powers to oversee all crypto businesses operating in the bloc, a move that could upend years of work by national watchdogs and businesses to regulate the industry.
Draft plans circulated by EU officials ahead of an announcement next month propose the European Securities and Markets Authority (ESMA) as the direct supervisor for all cryptoasset service providers. It would also become responsible for authorising new businesses.
Currently, crypto firms are required to gain authorisation in at least one member state, under the EU’s 2023 Markets in Cryptoassets (MiCA) rules. Once granted, that permission allows companies to “passport” their services across the bloc. After years of work by local regulators and companies to get the new process in place, the implementation window is due to end next year.
The Commission’s proposals, which are not yet final, said the ESMA would retain the power to delegate tasks to national authorities where appropriate.
The draft plans must also be agreed with Europe’s Parliament and the council of member states. The commission declined to comment.
“Reopening MiCA at this stage would introduce legal uncertainty, risk delaying the authorisation process, and divert attention and resources from the practical task of consistent implementation,” said Robert Kopitsch, the secretary general of Blockchain for Europe, an industry lobby group.
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Kopitsch said national regulators had closer day-to-day engagement with firms, complementing the ESMA’s cross-border oversight. “If, in the future, the EU decides to explore more centralised supervisory models, this should be done on the basis of concrete experience and evidence gathered from MiCA’s first years of implementation,” he added.
While a new market such as cryptoassets could be a good testbed for the ESMA to take on more responsibilities, “it’s a difficult time given where we are at with implementation for the goalposts to change”, said Andrew Whitworth, the founder of Global Policy Ltd, a consultancy that works with crypto companies and regulators. He added that the ESMA would need more resources to take on the work shouldered by local regulators.
The plan is part of a wider effort by EU policymakers to centralise supervision of markets, including handing the ESMA's direct oversight of significant clearing houses, depositories and trading venues. The move, which has been championed most enthusiastically by France and the EU institutions, has been controversial among some member states that are reluctant to cede powers and companies fearing another layer of rules.
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“In retrospect, you can question whether national supervision was the right decision because it has meant that 27 national supervisors needed to prepare, to build up teams,” Verena Ross, the ESMA’s chair, told Bloomberg News in September. “There is still a period where you could say: does it make more sense — for efficiency and for having the cross-border view — to do it in a central point?”
The proposed changes come after national regulators in France, Austria and Italy in September called for the ESMA to start overseeing major crypto companies directly, while smaller businesses would remain under local jurisdiction.
In July, the ESMA criticised processes at the Maltese regulator, which granted MiCA licences to a number of crypto companies.
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