EU pushes to centralize virtual asset supervisory authority…debate intensifies

The European Union (EU) is pursuing a plan to concentrate supervisory authority over crypto-assets (cryptocurrencies) and capital markets in the European Securities and Markets Authority (ESMA), prompting a growing debate within the industry.

On the 4th (local time), Cointelegraph reported that the European Commission plans to publish a draft bill in December granting ESMA direct supervisory powers over securities exchanges and virtual asset service providers. This move is being viewed as an attempt to build a centralized regulatory system similar to the U.S. Securities and Exchange Commission (SEC). The current Markets in Crypto-Assets Regulation (MiCA) will come into effect in December 2024, allowing licensed crypto-asset firms to operate across the 27 EU member states under a single license.

However, Faustine Fleuret, Head of Public Policy at Morpho, pointed out, "Transferring supervisory powers entirely to ESMA would require massive personnel and budgetary resources, and could particularly hinder the swift decision-making of innovative companies and fintech startups." She added, "Instead of ESMA directly making every decision, strengthening its authority to suspend or revoke authorizations when necessary would be a balanced approach."

Meanwhile, some policy experts see the expansion of ESMA's powers as a sign of maturation in EU crypto regulation. Dea Markova, Policy Director at Fireblocks, said, "Harmonizing regulatory standards among member states could address key challenges of MiCA and the Digital Operational Resilience Act (DORA), such as licensing, cybersecurity, and custody risk." She continued, "To mitigate risks related to the operational resilience of custody functions, a single supervisory framework or detailed guidelines are needed, and such supervisory convergence would positively affect MiCA-wide risk management."