EU plan boosts ESMA powers over crypto and capital markets
Analysis
Price Impact
HighThe proposal to significantly expand esma's supervisory powers over crypto-asset service providers (casps) and trading venues in the eu, effectively creating a 'european sec,' introduces a new, more centralized and potentially stricter regulatory environment for the entire crypto market within the bloc.
Trustworthiness
HighThe news is based on official proposals from the european commission, statements from high-ranking officials like ecb president christine lagarde, and reports from cointelegraph, detailing an ongoing legislative process.
Price Direction
Neutral to bearishWhile increased regulation could foster long-term institutional adoption by providing clarity and security, the immediate and medium-term impact of stricter, centralized supervision by esma is likely to increase compliance costs, potentially stifle innovation (especially for smaller entities), and create hurdles for crypto firms operating in the eu. this could lead to a 'flight' of some businesses or slow down market growth due to increased regulatory burden and scrutiny, potentially leading to downward pressure or stagnation.
Time Effect
LongThe legislative process for this proposal still requires approval from the european parliament and council, meaning full implementation will take time. however, once adopted, the structural changes to eu crypto oversight will have a lasting, long-term impact on how the crypto market operates within the region.
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Article Content:
Zoltan Vardai 1 minute ago EU plan boosts ESMA powers over crypto and capital markets ECB President Christine Lagarde first proposed the creation of an “European SEC” in 2023, two years before today’s official proposal was released, seeking to expand ESMA’s supervisory authority. Listen 0:00 News COINTELEGRAPH IN YOUR SOCIAL FEED The European Commission has proposed expanding the powers of the European Securities and Markets Authority (ESMA) over crypto and broader financial markets in a bid to narrow the competitive gap with the United States. Published Thursday, the package would transfer “direct supervisory competences” for key pieces of market infrastructure, including crypto-asset service providers (CASPs), trading venues and central counterparties, to the ESMA and strengthen its coordination role in the asset management sector. The proposal still needs approval from the European Parliament and the Council, where it is now under negotiation. If adopted, ESMA’s role in overseeing EU capital markets would more closely resemble the centralized framework of the US Securities and Exchange Commission . EU proposal aims to streamline markets and strengthen the ESMA’s authority. Source: finance.ec.europa.eu In September, France became the third European country to call for the Paris-based ESMA to take over supervision of major crypto firms, joining Austrian and Italian securities regulators. The move followed growing criticism of Malta’s crypto licensing regime. In July, the ESMA released a peer review of the Malta Financial Services Authority’s authorization of a crypto service provider, claiming that the regulator only “partially met expectations.” Due to concerns over more lenient regulations in some jurisdictions, France has also threatened to block the “passporting” of European licenses obtained from member states, raising enforcement gaps about Europe’s Markets in Crypto-Assets Regulation (MiCA). The three EU countries also backed revisions to MiCA, including stricter rules for crypto activities outside the EU, stronger cybersecurity oversight and a review of how new token offerings are regulated. EU policy-making timeline: Source: finance.ec.europa.eu Related: Ethereum treasury trade unwinds 80% as handful of whales dominate buys ECB President Lagarde first proposed a “European SEC” in 2023 The European Union began exploring whether to give the ESMA direct supervisory powers over crypto firms in early November, as previously reported by Cointelegraph. The EU’s current framework comprises multiple national and regional regulatory agencies, which are hindering cross-border trade and startup innovation. European Central Bank (ECB) President Christine Lagarde first proposed the idea of creating a “European SEC” in 2023. “Creating a European SEC, for example, by extending the powers of ESMA, could be the answer. It would need a broad mandate, including direct supervision, to mitigate systemic risks posed by large cross-border firms,” Lagarde said at the European Banking Congress in November 2023. Related: Grayscale Chainlink ETF draws $41M on debut, but not ‘blockbuster’ ESMA leadership sparks concerns for crypto, fintech startup development in the EU Industry watchers previously told Cointelegraph that ESMA’s supervision across the entire block may slow down innovation, particularly for smaller crypto and financial technology (fintech) companies relying on closer collaboration with domestic regulators. “Centralizing authorization and supervision entirely within ESMA would demand vast human and financial resources,” which would “slow down decision-making and innovation, particularly for newer players,” Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho, told Cointelegraph. EU capital markets fragmentation statistics. Source: finance.ec.europa.eu The broader package aims to boost wealth creation for EU citizens by making the bloc’s capital markets more competitive. In 2024, the market capitalization of stock exchanges accounted for only 73% of EU GDP, compared to 270% in the US, according to the European Commission’s report. Magazine: EU’s privacy-killing Chat Control bill delayed — but fight isn’t over # Cryptocurrencies # France # Law # Business # Government # Europe # Investments # SEC # Fintech # Bitcoin Regulation # Austria # Italy # ESMA # Cryptocurrency Exchange # European Union # Financial Systems # Christine Lagarde # MiCA # Stock Exchange # Regulation # Policy Add reaction