The European Commission is reportedly drafting new rules that would grant ESMA greater supervision over cryptocurrency companies, instead of leaving it up to local regulators.
Summary
- EU lawmakers are reportedly drafting reforms to give ESMA direct oversight of crypto firms, shifting authority away from national regulators.
- The proposal has sparked backlash from smaller EU states like Malta and Luxembourg, which fear losing regulatory autonomy and competitiveness.
According to a report by the Financial Times, EU lawmakers want to transfer crypto oversight powers from national authorities to European Securities and Markets Authority. This move comes under a proposal to grant the EU market regulatory authority direct oversight of stock exchanges, crypto companies, and clearinghouses.
Chair of the ESMA, Verena Ross said that the European Commission is currently drafting the regulatory reform which would serve to make regulatory supervision more uniform among the capital market in Europe. The EU had previously proposed making ESMA the main supervisor of crypto firms when MiCA was first drawn up, however it has not been fully implemented.
The plan to make ESMA the sole regulator for crypto in the EU has received backlash from smaller countries with budding crypto agendas, such as Luxembourg and Malta. Malta in particular has been actively granting licenses to crypto asset service providers.
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As of July 2025, Malta has granted at least five CASP licenses under the MiCA regulatory framework, including licenses for major crypto exchanges such as Crypto.com and OKX. These five licenses were among the first in Europe to be granted under the new MiCA framework, making Malta a significant early adopter of the EU’s comprehensive crypto-asset framework.
In fact, ESMA had criticized Malta’s license approval process for crypto companies. In July, the EU financial authority had alleged that “some risks areas were not adequately assessed during the authorization process” for one unnamed company that received a license from Malta authorities.
“It also means that people had to build up specific new resources and expertise 27 times in different national supervisors, which could have been done more efficiently once at a European level,” said Ross to Financial Times.
Why ESMA at the helm is controversial
Established in 2011, ESMA was formed in hopes of improving the harmonization of market rules across the EU. However, most of the region’s financial market activities still fall under the supervision of each of its 27 national authorities.
Ross said that the EU watchdog has “tried for quite some time with the capital markets union and other initiatives to build a more effective capital market.” Despite the efforts, it has yet to implement such measures to place all the EU markets under one umbrella because each area has very different market structures.
Not everyone agrees that ESMA should have full control over the various EU markets, especially in terms of its emerging crypto markets. Some smaller EU nations, including Luxembourg, Malta, and Ireland, have pushed back against giving more authority to ESMA, arguing it could threaten their well-established financial sectors.
Not to mention, for the growing crypto industry, placing ESMA at the helm of regulating crypto asset service providers could create a rigid, one-size-fits-all system that stifles innovation and concentrates too much power in a single authority.
Head of Luxembourg’s financial watchdog, Commission de Surveillance du Secteur Financier or CSSF, Claude Marx had warned that placing all EU investment funds under ESMA’s supervision would risk creating a “monster” in what he deems to be an “extremely complex” organization.
“It is a fantasy that the European Commission wants to push a single supervisor. The European Commission has always stated they do not have an idée fixe to have a European SEC,” said Marx, referring to the U.S financial watchdog.
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