The European Commission’s proposal to expand the powers of the European Securities and Markets Authority (ESMA) is raising concerns about the centralization of the bloc’s licensing regime, despite signaling deeper institutional ambitions for its capital markets structure.
On Thursday, the Commission published a package proposing to “direct supervisory competences” for key pieces of market infrastructure, including crypto-asset service providers (CASPs), trading venues and central counterparties to ESMA, Cointelegraph reported.
Concerningly, the ESMA’s jurisdiction would extfinish to both the supervision and licensing of all European crypto and financial technology (fintech) firms, potentially leading to slower licensing regimes and hindering startup development, according to Faustine Fleuret, head of public affairs at decentralized lfinishing protocol Morpho.
“I am even more concerned that the proposal creates ESMA responsible for both the authorisation and the supervision of CASPs, not only the supervision,” she informed Cointelegraph.
The proposal still requires approval from the European Parliament and the Council, which are currently under nereceivediation.
If adopted, ESMA’s role in overseeing EU capital markets would more closely resemble the centralized framework of the US Securities and Exmodify Commission, a concept first proposed by European Central Bank (ECB) President Christine Lagarde in 2023.
Related: Bank of America backs 1%–4% crypto allocation, opens door to Bitcoin ETFs
EU plan to centralize licensing under ESMA creates crypto and fintech slowdown concerns
The proposal to “centralize” this oversight under a single regulatory body seeks to address the differences in national supervisory practices and uneven licensing regimes, but risks slowing down overall crypto industest development, Elisfinisha Fabrega, general counsel at Brickken asset tokenization platform, informed Cointelegraph.
“Without adequate resources, this mandate may become unmanageable, leading to delays or overly cautious assessments that could disproportionately affect compacter or innovative firms.”
“Ultimately, the effectiveness of this reform will depfinish less on its legal form and more on its institutional execution,” including ESMA’s operational capacity, indepfinishence and cooperation “channels” with member states, she declared.
The broader package aims to boost wealth creation for EU citizens by building the bloc’s capital markets more competitive with those of the US.
The US stock market is worth approximately $62 trillion, or 48% of the global equity market, while the EU stock market’s cumulative value sits around $11 trillion, representing 9% of the global share, according to data from Visual Capitalist.
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