EU eyes ESMA’s expanded powers in monitoring cryptocurrencies and stock exchanges

Brussels is pushing for a single regulator to oversee crypto exchanges and trading platforms across the EU, eyeing a Wall Street-style strategy.

The Financial Times reports that the European Commission wants to propose expanding the role of the European Securities and Markets Authority, allowing it to directly supervise major cross-border organizations, including stock exchanges, crypto companies and clearinghouses.

A draft document outlining plans to unify capital markets and reduce the regulatory patchwork between member states is due to be published in December as part of a larger “market integration package”.

If the proposal goes ahead, ESMA would have the power to intervene in cross-border disputes, make binding decisions and potentially supervise some of the most systemically important crypto and trading companies in the bloc.

Such an overhaul, modeled after the US Securities and Exchange Commission, would be one of the EU’s most ambitious attempts yet to centralize financial supervision and address years of market fragmentation, the report said.

For now, the Commission is “still exploring the possibility of EU-level supervision” across critical financial infrastructure, including trading venues, central securities depositories, central counterparties, and even large cross-border companies such as asset managers.

“We are considering different models for single supervision, with a view to balancing EU interests and local expertise,” it added.

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European Central Bank (ECB) President Christine Lagarde has vocally advocated the completion of a “capital markets union,” arguing that a unified regulator with substantial enforcement powers is essential to reducing systemic risk and ensuring proper supervision of cross-border companies.

When Lagarde attended the 2023 European Banking Conference, she called for the creation of a “European SEC” that would be able to directly supervise large financial institutions.

“A solution could be, for example, by expanding ESMA’s powers to create a European SEC. Broader powers, including direct supervision, will be needed to reduce the systemic risks posed by market infrastructures such as large cross-border companies and EU central trading partners,” Lagarde said at the event.

However, not all regulators support the Commission’s direction, and some warn that centralized supervisory authorities may not act in the best interests of small countries with financial hubs.

Officials in Luxembourg and Dublin have opposed the idea, arguing it would unfairly disadvantage local sectors and could transfer too much influence to larger member states.

Luxembourg’s finance minister, Gilles Roth, was quoted as saying, “We want (supervisory) consolidation rather than a costly and inefficient centralized model.”

Similarly, those in the crypto industry are also raising questions. Malin Capel, policy advisor at European funds industry lobby group Efama, warned that ESMA’s expanded role would come with increased compliance costs and “higher fees paid by the industry.”

As previously reported by crypto.news, the Banque de France is already pushing ahead with the idea of ​​giving ESMA oversight of the bloc’s entire crypto market.

Centralizing supervision under ESMA will strengthen enforcement and prevent regulatory arbitrage, particularly in the case of stablecoins issued inside and outside the EU, said Banque de France Governor François Villeroy de Galhau.

Other jurisdictions, such as Austria and Italy, also support the idea of ​​delegating more direct oversight to ESMA.

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