EU finance ministers reached a political agreement on Oct. 9 to give the European Securities and Markets Authority (ESMA) direct supervision over the bloc's largest crypto-asset service providers, reshaping how the Markets in Crypto-Assets Regulation (MiCA) is enforced across 27 member states.
The proposed overhaul targets a weakness in MiCA's passporting system, which lets a firm licensed in one EU country serve customers throughout the bloc while remaining primarily supervised by its home regulator. Under the Council of the European Union's negotiating position, ESMA would directly oversee crypto providers with at least 15 million active EU users, or those meeting three of five additional significance criteria. Those criteria include more than 1 million active users, over €1 billion in crypto assets under custody, and more than €4 billion in annual client transactions.
Officials estimate only 10 to 15 of roughly 360 providers would qualify for centralised supervision, a considerably narrower scope than the European Commission's original plan. The Council must still negotiate the proposal with the European Parliament before any change becomes law.
The passporting arrangement reduces duplication for firms expanding across borders, but places considerable responsibility on the national authority issuing initial approval. In July 2025, ESMA reviewed the Malta Financial Services Authority's authorization of an unnamed crypto provider and found insufficient evidence that the licensing assessment adequately addressed governance, conflicts of interest, technology infrastructure, custody arrangements and certain anti-money-laundering risks. Malta said it was implementing the recommendations but opposed transferring supervision to ESMA, arguing MiCA was too new to justify another regulatory layer.
Separately, ESMA has told national supervisors that MiCA-authorised crypto platforms should stop providing services involving non-compliant asset-referenced and e-money tokens, with remaining pre-existing exposures remediated within three months. Only limited activity needed to liquidate, convert, withdraw, transfer or safeguard existing positions would be allowed.
The move reflects a stricter stance on stablecoin compliance. Non-compliant tokens may lose EU access, potentially fragmenting order books, increasing conversion friction and pushing activity toward offshore venues. However, regulatory ambiguity also has costs, and MiCA is forcing competition away from regulatory arbitrage and toward product quality. The stablecoin market has already seen MiCA-driven consolidation around authorised alternatives such as USDC, though it remains uncertain whether EU-native euro stablecoins can become globally competitive.
The digital euro is distinct from private stablecoins as public money, but both belong to Europe's broader debate over programmable payments. The final outcome will depend on whether the regulated market remains open enough for credible competitors and whether liquidity migrates elsewhere.
