EU Expands ESMA Powers Over Crypto Firms Under MiCA

The proposal, published on Thursday, represents a strategic shift in how the European Union governs its burgeoning crypto sector. By transferring “direct supervisory competences” for crypto-asset service providers, trading venues, and central counterparties to ESMA, the European Commission seeks to move beyond a patchwork of national oversight. This centralization under a single EU-wide authority is intended to ensure consistent application of the landmark MiCA regulation, reduce regulatory arbitrage between member states, and build a more unified and trustworthy market for investors and operators alike.

The focus on CASPs is particularly critical, as these entities—including exchanges and wallet providers—form the backbone of the crypto ecosystem. Granting ESMA direct oversight means these firms will answer to a centralized regulator for key compliance matters, rather than navigating potentially divergent requirements from 27 national authorities. This streamlined approach is expected to reduce operational complexity for cross-border crypto businesses and strengthen enforcement mechanisms, thereby enhancing overall market integrity and consumer protection across the bloc.

A driving force behind the proposal is the explicit aim to “narrow the competitive gap with the United States.” EU officials have observed the scale and influence of U.S. crypto markets, which operate under the scrutiny of established federal regulators like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). By empowering ESMA with analogous direct supervisory powers, the EU is signaling its intent to create a regulatory environment that is equally clear, stringent, and capable of fostering credible, large-scale market participation.

This initiative is not merely about catching up but about shaping a distinct EU model that balances innovation with stability. The package also strengthens ESMA’s coordination role in the asset management sector, suggesting a holistic view of financial market modernization. The underlying thesis is that a coherent, well-supervised digital finance landscape will attract investment, talent, and business activity, ensuring the EU remains a formidable player as traditional finance (TradFi) and crypto continue to converge. The move underscores a global trend where major economic blocs are racing to define the rulebook for the next generation of financial services.

While the European Commission’s proposal marks a clear directional statement, it is not yet law. The text now enters a crucial phase of negotiation and must secure approval from both the European Parliament and the Council of the European Union, representing member states. This process will involve debates over the scope of ESMA’s new powers, funding for the expanded remit, and the precise timeline for implementation. The outcome will determine the final shape of EU crypto supervision.

For market participants, the proposal clarifies the EU’s long-term regulatory trajectory. Crypto firms operating in Europe can anticipate a future with a single primary supervisory contact for MiCA compliance, potentially simplifying engagement but also raising the stakes for adherence to uniform standards. The prospect of more centralized and potent oversight is likely to accelerate institutional adoption by providing the regulatory clarity and safety assurances that large TradFi entities demand. As the legislative process unfolds, the industry will be watching closely, understanding that this consolidation of authority under ESMA could set a global benchmark for how major economies regulate digital asset markets.