- Under the current MiCA framework, firms can gain cross-border access across the EU using a single national license.
- National regulators and companies fear a loss of control and added bureaucracy.
- France, Austria and Italy have supported expanding ESMA’s role for large firms.
The European Commission is preparing a proposal to grant the European Securities and Markets Authority (ESMA) expanded powers over the crypto sector.
If adopted, ESMA would become the primary supervisor for all crypto-asset service providers across the European Union, Bloomberg reported.
This proposal represents a major shift in how the bloc oversees digital assets, moving supervision to a central authority rather than relying primarily on 27 national regulators.
The plan, expected to be unveiled next month, arrives only months before the full implementation of the Markets in Crypto-Assets Regulation (MiCA).
MiCA, adopted in 2023, is set to become the EU’s flagship regulatory framework for crypto assets.
Under MiCA as currently structured, firms obtain authorization in a single member state and use that license to operate across the EU.
That system, the result of years of work between regulators and industry, was designed to reduce fragmentation and simplify operations across borders.
MiCA faces uncertainty
MiCA was intended to provide legal clarity and consistent rules throughout the EU.
By allowing firms to secure authorization in one country and passport that permission into other member states, the framework aimed to streamline licensing and lower compliance barriers.
The Commission’s new plan would undo that process by giving ESMA direct responsibility for approving and supervising all providers, regardless of where they are based.
The draft proposal indicates ESMA might delegate certain tasks back to national authorities when needed, but ESMA would remain the central point of contact.
That change has sparked concern among those who helped shape MiCA. With the implementation window closing in 2024, firms and local supervisors worry reopening the framework now could cause delays and confusion.
Critics argue revisiting MiCA’s core design risks undermining legal certainty. Others warn that shifting responsibilities to ESMA without adequate staffing and funding could weaken enforcement.
The proposal still requires approval by both the European Parliament and the Council of the EU before it can become law.
Pushback from national regulators
The Commission’s move has not gone unnoticed in the crypto industry. Many stakeholders believe national regulators remain better positioned to handle day-to-day engagement with firms.
Blockchain for Europe, an industry group, warned that centralizing control at this stage could distract from the immediate task of making MiCA operational across member states.
Advisors have also noted ESMA would need significant additional personnel and resources to take on such a broad remit.
National authorities have already invested heavily to build teams and develop expertise required by MiCA. Replacing this decentralized approach with a fully centralized process risks licensing bottlenecks and slower supervision.
Earlier this year, ESMA’s chair, Verena Ross, suggested the existing setup—27 separate supervisors preparing for the same duties—may not be the most efficient model.
France backs a centralized model
France, along with some other EU institutions, has pushed hardest for expanding ESMA’s authority.
In September, regulators from France, Austria and Italy proposed that ESMA directly supervise major crypto firms while smaller providers remain under national supervision.
That two-tier approach would aim to balance centralized oversight for the largest players with continued national oversight for smaller companies.
The proposal aligns with a broader EU trend toward centralizing financial supervision. Brussels has also floated extending ESMA’s reach to entities such as clearing houses, trading venues and custodians.
However, several member states resisted, arguing that surrendering national control could create unnecessary bureaucracy and reduce regulatory flexibility.
Pressure for reform intensified in July after ESMA raised concerns about licensing practices in Malta. The Maltese regulator had granted MiCA approvals to several firms, prompting questions about consistency and due diligence across the bloc.
That episode strengthened calls for a more unified supervisory model.
As the Commission finalizes its proposal, the crypto sector remains on edge. Businesses are watching closely to see whether licensing and regulatory oversight will continue to operate at the national level or move under a single EU-level authority.