The European Securities and Markets Authority (ESMA) is set to receive sweeping new powers to directly supervise crypto-exchanges and trading platforms across the European Union, under a draft reform designed to centralise regulation and reduce fragmentation in cross-border markets.
For years, the regulatory landscape for crypto-asset service providers in the European Union has been characterised by 27 national supervisors each applying rules slightly differently. Under the landmark Markets in Crypto‑Assets Regulation (MiCA), firms licensed in one member state could “passport” their permission to operate across the bloc — but enforcement and supervision still lay at the national level. This patchwork system has fueled concerns about regulatory arbitrage: firms registering in jurisdictions with softer supervision and operating EU-wide.
Now, the European Commission is preparing a major legislative package that would expand ESMA’s remit to cover not only traditional financial markets but also major crypto-exchanges, trading venues and post-trade infrastructures. Under the proposal, ESMA would be granted direct oversight powers over system-critical platforms — meaning it could issue binding decisions, resolve disputes between national regulators, and ensure uniform supervision of cross-border entities. This shift is intended to strengthen investor protection, reduce regulatory duplication and make Europe’s capital markets more competitive globally.
From fragmented oversight to a unified crypto-supervisor
Supporters argue the reform is overdue: large crypto-asset firms operate across borders, and a single supervisor like ESMA could streamline licensing, reduce compliance costs and improve regulatory predictability. According to one senior official, Europe “needs a European SEC” to match U.S. market infrastructure and attract investment. However, critics caution that centralising power risks creating a bloated bureaucracy detached from local market nuances. Smaller member states worry about the loss of national supervisory competence and the potential for one-size-fits-all regulation to stifle innovation.
For the crypto industry, the reform presents both opportunity and risk. On the one hand, a harmonised regime could reduce fragmentation and simplify cross-border expansion. On the other, platforms may face tougher scrutiny, higher compliance burdens and more standardised supervision. The December draft is expected to set out thresholds — such as turnover or cross-border activity — that determine which firms fall under ESMA’s direct remit. If adopted, the new framework could take effect by 2026.
In short: the proposed expansion of ESMA’s power marks a significant turning point in how crypto-exchanges will be regulated in Europe — shifting from national oversight to a centralised model.
