The European Union is preparing for a sweeping overhaul of its financial supervision framework, one that could reshape the future of the continent’s cryptocurrency and fintech sectors.
According to early reports, the European Commission is drafting a proposal that would significantly expand the powers of the European Securities and Markets Authority (ESMA), giving it direct supervisory authority over both stock exchanges and crypto service providers across the bloc.
The plan, expected to be unveiled in December 2025, could effectively transform ESMA into Europe’s equivalent of the US Securities and Exchange Commission (SEC), a centralised regulator with continent-wide reach.
Currently, under the Markets in Crypto-Assets Regulation (MiCA), which came into effect for crypto asset service providers (CASPs) in December 2024, companies licensed in one EU member state can operate across all 27 EU countries using the so-called passporting mechanism. This decentralised model relies on collaboration between national regulators and ESMA.
However, Brussels now appears eager to consolidate authority in Paris, where ESMA is headquartered, to ensure more consistent supervision and reduce regulatory arbitrage.
Industry Fears a Slowdown in Innovation
The proposal has triggered alarm across Europe’s crypto and fintech industries, with critics warning that a fully centralised supervisory model could choke innovation and slow down market responsiveness.
Faustine Fleuret, Head of Public Affairs at decentralised lending protocol Morpho, cautioned that granting ESMA complete control would require “vast human and financial resources,” a move that could delay authorisations and stifle emerging projects.
“Centralising authorisation and supervision entirely within ESMA would likely slow down decision-making and innovation, particularly for newer players in crypto and fintech who rely on close collaboration with their domestic regulators,” Fleuret said.
Instead, Fleuret advocated a balanced approach, one where ESMA maintains strong oversight powers over national authorities, including the ability to suspend or revoke licences, but does not monopolise the process entirely.
Her concerns echo wider fears among industry participants that Brussels’ centralisation drive could create a bureaucratic bottleneck at a time when Europe is vying to compete with the US, UK and Asia as a global crypto hub.
The Passporting Dilemma
The debate comes amid recent tensions over the EU’s passporting framework, a cornerstone of the bloc’s financial integration.
In September 2025, France’s securities regulator (AMF) warned it might block passporting of crypto licences under MiCA, citing concerns about enforcement gaps and uneven application of rules across member states.
Fleuret stressed that the EU passport remains one of the few competitive advantages Europe offers to crypto firms, enabling them to scale across multiple jurisdictions without additional authorisations.
“Jeopardising the EU passport means depriving crypto market players of the only competitive advantage that Europe currently offers them,” she said.
The French regulator’s stance has reignited questions about whether EU-wide harmonisation is achievable without either sacrificing national flexibility or imposing heavy-handed centralisation.
Experts See a Silver Lining
Despite industry concerns, some policy experts argue that expanding ESMA’s authority could strengthen market integrity and enhance regulatory consistency across the EU.
Dea Markova, Director of Policy at digital asset custody platform Fireblocks, said that centralising oversight could help address critical issues under MiCA and the Digital Operational Resilience Act (DORA), including custody risks, cybersecurity standards and operational resilience.
“At a principal level, we believe that more standard-setting and guidance is needed to address risks stemming from the operational resilience of the custody function,” Markova noted.
“Other areas of MiCA and DORA can benefit from supervisory convergence, whether through additional guidance or by creating a single EU supervisor.”
Markova added that the success of the initiative will hinge on implementation quality and adequate resourcing. Without sufficient expertise and capacity, ESMA could struggle to manage the increased workload, undermining the very stability it seeks to promote.
The idea of a single EU supervisory body also enjoys backing from European Central Bank (ECB) President Christine Lagarde, who voiced support for such a structure at the European Banking Congress in 2023. Lagarde argued that a unified authority would bolster investor confidence and ensure a level playing field across member states.
A Crossroads for Europe’s Crypto Future
As the European Commission prepares to publish the draft proposal in December, the battle lines are clearly drawn. On one side are innovation advocates who fear that over-centralisation could push startups and capital toward more flexible jurisdictions like the UK, Switzerland and the US. On the other hand, regulatory proponents see consolidation as vital to protecting investors and ensuring a uniform application of MiCA.
Ultimately, the debate reflects a deeper question about Europe’s strategic direction: whether it can balance regulatory consistency with entrepreneurial dynamism in one of the world’s fastest-evolving industries.
If Brussels strikes the right balance, the EU could solidify its status as a global standard-setter for digital assets. But if the centralisation plan overreaches, it risks stalling Europe’s momentum, just as global competition in crypto regulation heats up.
