The European Commission’s proposal to expand the powers of the European Securities and Markets Authority (ESMA) raises concerns about the centralization of the bloc’s licensing regime, even as it hints at deeper institutional ambitions for the structure of its capital markets.
On Thursday, the Commission published a package proposing “direct supervisory powers” for key elements of market infrastructure, including crypto-asset service providers (CASPs), trading platforms and centrals. counterparties at ESMACointelegraph reported.
There is concern that ESMA’s jurisdiction would extend to both supervision and licensing of all European crypto and financial technology (fintech) companies, which could lead to a slowdown in licensing regimes and hamper the development of startups, according to Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho.
“I am even more concerned that the proposal makes ESMA responsible for both authorization and monitoring of PSAPs, and not just monitoring,” she told Cointelegraph.
The proposal still needs to be approved by the European Parliament and the Council, which are currently under negotiation.
If adopted, ESMA’s role in supervising EU capital markets would more closely resemble ESMA’s centralized framework. United States Securities and Exchange Commissiona concept first proposed by the President of the European Central Bank (ECB), Christine Lagarde, in 2023.
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EU plan to centralize licensing under ESMA raises concerns over crypto, fintech slowdown
The proposal to “centralize” this oversight under a single regulator aims to address differences in national oversight practices and uneven licensing regimes, but risks slowing the overall development of the crypto industry, Elisenda Fabrega, general counsel at asset tokenization platform Brickken, told Cointelegraph.
“Without adequate resources, this mandate could become unmanageable, leading to delays or overly conservative assessments that could disproportionately affect smaller or innovative companies.”
“Ultimately, the effectiveness of this reform will depend less on its legal form than on its institutional execution,” including ESMA’s operational capacity, independence and “channels” of cooperation with member states, she said.
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The broader plan aims to boost wealth creation for EU citizens by making the bloc’s capital markets more competitive with those in the United States.
The US stock market is worth around $62 trillion, or 48% of the global stock market, while the cumulative value of the European stock market is around $11 trillion, or 9% of the global share, according to data by Visual Capitalist.
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