The European Commission has proposed expanding the European Securities and Markets Authority’s (ESMA) powers, touching off debate about centralising the EU’s licensing regime and signaling bigger institutional ambitions for EU capital markets.
The package would give ESMA “direct supervisory competences” over key market infrastructure, including crypto-asset service providers (CASPs), trading venues and central counterparties. Under the plan ESMA would handle both authorisation (licensing) and supervision of European crypto and fintech firms — a shift critics warn could slow approvals and hamper startup growth.
“I am even more concerned that the proposal makes ESMA responsible for both the authorisation and the supervision of CASPs, not only the supervision,” said Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho. The draft still needs sign-off from the European Parliament and the Council, where negotiations are ongoing.
If adopted, ESMA’s role would look more like a centralised model akin to the US Securities and Exchange Commission — an idea previously mentioned by European Central Bank President Christine Lagarde. Supporters argue centralisation would harmonise divergent national supervisory practices and reduce uneven licensing across member states, but practical challenges remain.
“Without adequate resources, this mandate may become unmanageable, leading to delays or overly cautious assessments that could disproportionately affect smaller or innovative firms,” warned Elisenda Fabrega, general counsel at tokenization platform Brickken. She added that the reform’s success will depend largely on ESMA’s operational capacity, independence and cooperation channels with member states, not just the legal framework.
The broader reform aims to boost the competitiveness of EU capital markets and increase wealth creation for EU citizens. By comparison, the US stock market is worth roughly $62 trillion (about 48% of global equity) versus roughly $11 trillion for the EU (around 9%), highlighting the gap the Commission seeks to narrow.
The proposal is drawing attention both for its potential to create a single EU-wide supervisory authority for critical market functions and for the practicalities of centralising licensing and oversight. Ongoing debates in the Parliament and Council will determine whether the plan goes ahead and how ESMA’s enlarged role would be resourced and structured to balance harmonisation with timely, innovation-friendly authorisations.