The European Commission has unveiled a significant legislative package aimed at centralizing financial market supervision, with direct implications for the crypto sector. The proposal seeks to grant the European Securities and Markets Authority (ESMA) "direct supervisory competences" over major crypto-asset service providers (CASPs), trading venues, and other systemically important firms.
Published on December 4, 2025, the plan is part of Brussels' broader strategy to reduce regulatory fragmentation across the European Union and create a supervisory framework more akin to the centralized model of the U.S. Securities and Exchange Commission (SEC). The move is driven by concerns that the current patchwork of national regulators creates enforcement gaps and allows firms to exploit lighter standards in certain jurisdictions.
The push for this overhaul has been led by France, Italy, and Austria. Their stance solidified after an ESMA peer review in July 2025 found that Malta's financial regulator only "partially met expectations" when authorizing a crypto provider. A key concern is the "passporting" mechanism under the Markets in Crypto-Assets Regulation (MiCA), which could allow a weakly granted license from one member state to be used across the bloc, undermining the regulation's integrity.
These three nations are also backing revisions to MiCA itself, calling for stricter oversight of crypto activity outside the EU, enhanced cybersecurity scrutiny, and a review of rules for token offerings.
The concept of a "European SEC" has been circulating since at least 2023, when European Central Bank (ECB) President Christine Lagarde argued that fragmented oversight created blind spots for cross-border firms. She explicitly suggested extending ESMA's powers with a broad mandate for direct supervision to mitigate systemic risks.
While proponents argue that centralized oversight will improve regulatory clarity, attract investment, and build market confidence, industry groups warn it could stifle innovation. Critics, including Faustine Fleuret of the Morpho protocol, contend that centralizing all authorization and supervision within ESMA would demand vast resources, potentially slowing decision-making and disadvantaging smaller startups that rely on quicker responses from local regulators.
The proposal is now subject to negotiation and requires approval from both the European Parliament and the Council of the EU. Its fate is tied to the bloc's wider ambition to strengthen its capital markets, where EU stock exchange market capitalization was just 73% of GDP in 2024, compared to 270% in the United States.
