EU Plans Centralized Oversight of Stock and Crypto Exchanges Under ESMA

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The European Securities and Markets Authority (ESMA) is set to gain substantially expanded supervisory powers over Europe’s financial market infrastructure, including major stock exchanges, crypto exchanges, and clearing houses. 

Under the proposed framework, ESMA would have direct oversight over significant crypto exchanges, comparable to the SEC in the United States. There have recently been concerns that the system of national frameworks under the Markets in Crypto‑Assets (MiCA) regulation, designed to provide a uniform digital asset licensing framework, has nonetheless led to fragmentation that has hindered competitiveness.

In plans drafted by the European Commission, expected in a “markets integration package” this December, ESMA would assume oversight of “the most significant cross-border entities” rather than leaving supervision solely to national regulators. 

Digital asset firms licensed by European member state regulators may currently operate across Europe via national licences under MiCA. However, under the new regime, the most significant crypto exchanges would fall under direct ESMA supervision. 

At present, the EU’s regulatory ecosystem is made up of dozens of unique regulators from each member state, as well as hundreds of other relevant institutions, making cross-border capital flows costly and potentially hampering the growth of Europe’s capital markets union. 

However, jurisdictions that have done well out of the current system, such as Luxembourg, are wary of handing oversight to a central body that could damage their local financial ecosystems and raise compliance costs.