The European Commission’s proposal to broaden the European Securities and Markets Authority’s (ESMA) powers is provoking debate over centralizing the EU’s licensing regime while signaling larger institutional ambitions for the bloc’s capital markets.
The Commission released a package proposing “direct supervisory competences” for key market infrastructure, including crypto-asset service providers (CASPs), trading venues and central counterparties. Under the plan ESMA would take on both licensing (authorisation) and supervision of European crypto and fintech firms — a shift critics warn could slow licensing and impede 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 requires approval from the European Parliament and the Council, where negotiations are ongoing.
If adopted, ESMA’s role would more closely resemble a centralized model akin to the US Securities and Exchange Commission — an idea previously floated by European Central Bank President Christine Lagarde. Proponents say centralisation would harmonise divergent national supervisory practices and uneven licensing regimes across member states, but implementation risks 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 more on institutional execution — ESMA’s operational capacity, independence and cooperation channels with member states — than on the legal framework alone.
Beyond crypto and fintech concerns, the broader package aims to make EU capital markets more competitive with the US and boost wealth creation for EU citizens. The US stock market’s value is roughly $62 trillion — about 48% of global equity — versus approximately $11 trillion for the EU, or around 9% of the global total, highlighting the gap the Commission aims to narrow.
The proposal has drawn attention both for its potential to create a single, EU-wide supervisory authority for critical market functions and for the practical challenges of centralising licensing and oversight. Debates in the Parliament and Council will determine whether the plan proceeds and how ESMA’s enlarged role would be resourced and structured to balance harmonisation with innovation-friendly, timely authorisations.
