Crypto-assets and exchanges: more powers for EU supervisory authority

The European Union (EU) is considering tighter control of exchanges and cryptocurrency companies operating in the EU. According to plans by the European Commission, their regulation is to be transferred from national authorities to the European Securities and Markets Authority (ESMA). ESMA Chairwoman Verena Ross told the British daily newspaper Financial Times. Such changes would provide an important impetus for “a more integrated and globally competitive capital market in Europe,” she explained. The aim is to tackle “the ongoing fragmentation of markets” in order to “create a more harmonised capital market in Europe,” Ross continued.

When drafting the EU regulation on markets for crypto-assets—in English “Markets in Crypto-Assets,” in short MiCA Regulation or MiCA—which was adopted in 2023 and came into force this year, the Commission had originally wanted to make the Paris-based ESMA the main supervisory authority for providers of crypto-asset services. However, considering doubts whether ESMA would be able to fulfill this task, control over the dynamic crypto market remained in the hands of the national supervisory authorities.

However, this has led to inefficiencies, Ross explained to the Financial Times. According to Ross, intensive work is being carried out on a standardized implementation of the MiCA regulation. “This also means that people have had to build up specific new resources and expertise 27 times in different national supervisory authorities, which could have been done uniquely and more efficiently at European level.” The Capital Markets Union and other initiatives have been trying to “build a more effective capital market” for some time, said Ross. “The reality has shown that this is not easy given our very different market structures.”

Supporters and sceptics

The European Commissioner for Financial Services, Maria Luís Albuquerque, said in a speech last month that a proposal was under consideration to transfer “supervisory powers for the main cross-border entities,” including exchanges, crypto companies, and others, to ESMA. Given the changes this would bring to ESMA's governance and decision-making processes, various models would be examined “based on other existing models of centralized supervision,” Albuquerque said.

However, the EU Commission's plans are controversial, particularly in smaller EU countries such as Luxembourg, Malta, and Ireland. They fear that a centralization of powers at ESMA could undermine their respective financial sectors, as the Financial Times writes. Claude Marx, head of the Luxembourg Financial Supervisory Authority, explained that ESMA would become a “monster” if it were made the main supervisory authority for all EU investment funds.

On the other hand, the EU needs to find funding for the extensive investments in defense, energy transition, and digitalization. In the view of ESMA Chairwoman Ross, this has given new impetus to the removal of “remaining barriers and fragmentation.” The last word on the matter has not yet been spoken.

(akn)