The EU is thinking of entrusting ESMA – the European equivalent of our Consob – with the supervision of cryptocurrency markets. A draft regulation on which Brussels is working envisages entrusting the European Securities and Market Authority with direct supervisory powers over providers of services linked to crypto-assets (CASP or Crypto-Asset Service Providers). The strengthened powers include the power to authorize new businesses and/or service providers, carry out inspections and impose any sanctions. The new regulation should be presented by the European Commission on December 3, but has yet to receive the opinion of the European Parliament and the Council.
Pressure from Brussels to entrust superpowers to ESMA
The European Commission is pushing for the markets regulator, a sort of “European Consob,” to gain new powers to oversee all crypto firms operating in the bloc. A move that could overturn years of work by national control bodies and companies to regulate the sector.
The draft regulation anticipated by some European officials ahead of official publication in December proposes ESMA as the direct supervisor of all cryptocurrency service providers. The Authority would also become responsible for authorizing new activities.
The current status
Currently, cryptocurrency companies are required to obtain authorization in at least one Member State, according to the current regulation of MiCA, the European directive on cryptocurrency markets, in force from 2023. Once granted in a European state, this authorization allows companies to offer their services throughout the EU.
The new regulation would therefore undo “years of work” by national regulators and companies to implement the new procedure. However, the Commission’s proposal would allow ESMA to delegate its tasks to national authorities where appropriate.
Centralization or decentralization?
The new regulation, therefore, would centralize all supervisory powers on ESMA. An evolution that market operators and pressure groups have not welcomed at this initial stage, but the EU is advocating, with the support of some Member States, to harmonize regulation of the sector and supervision.
The new regulation is part of a broader effort by Brussels to centralize oversight of markets, which includes giving ESMA direct oversight of clearing houses, custodians and trading venues. The initiative was enthusiastically supported by France and the European institutions, but is opposed by some member states, reluctant to cede powers, and by companies who fear further regulatory tightening.
The changes come after national regulators in France, Austria and Italy, in a position paper, asked ESMA in September to directly supervise major cryptocurrency firms, while smaller firms would remain under local jurisdiction. A sort of halfway centralization.
