France Urges EU to Give ESMA Direct Crypto Oversight

Bank of France Governor François Villeroy de Galhau has issued a stark warning about the dangers of fragmented crypto regulation across the European Union. Speaking at the ACPR-AMF Fintech Forum in Paris, the governor emphasized that the current approach to crypto oversight, which relies heavily on national regulators, creates significant vulnerabilities for the bloc’s financial system. “I also advocate, along with the president of the AMF, for European supervision of crypto-asset issuers, carried out by ESMA,” Villeroy de Galhau stated, highlighting the urgent need for a unified regulatory front.

The governor’s proposal centers on granting the European Securities and Markets Authority direct supervisory authority over crypto-asset issuers operating under the MiCA framework. This move would represent a significant shift from the current system where individual member states maintain primary oversight responsibility. Villeroy de Galhau argued that only through centralized supervision can the EU guarantee consistent application of rules and prevent regulatory arbitrage, where crypto firms might seek out jurisdictions with more lenient oversight.

The call for ESMA to take a more prominent role reflects growing concerns among European financial authorities about maintaining control over the rapidly evolving crypto landscape. Villeroy de Galhau’s warning that fragmented oversight could threaten the bloc’s financial sovereignty underscores the strategic importance of establishing a cohesive regulatory approach that can withstand global competitive pressures and protect European economic interests.

Alongside the push for centralized supervision, the Bank of France governor called for tightening the Markets in Crypto-Assets regulation’s provisions governing stablecoin issuance. Stablecoins, which are designed to maintain a stable value relative to traditional currencies, have become a particular focus for regulators due to their potential systemic importance and the risks they could pose to financial stability if not properly regulated.

Villeroy de Galhau’s position aligns with broader regulatory concerns about the rapid growth of stablecoins and their increasing integration with traditional financial systems. By advocating for stricter stablecoin rules within the MiCA framework, the Bank of France aims to address potential vulnerabilities before they become systemic threats. The governor’s emphasis on this issue reflects the recognition that stablecoins could potentially function as shadow payment systems outside traditional banking channels.

The proposed enhancements to MiCA’s stablecoin regulations would complement the centralized supervision model by ensuring that all issuers across the EU adhere to the same rigorous standards. This dual approach of strengthening both oversight mechanisms and substantive rules demonstrates the comprehensive nature of the Bank of France’s regulatory vision for the crypto sector.

The proposal to grant ESMA direct supervisory authority over crypto-asset issuers represents a significant expansion of the regulator’s mandate beyond its traditional securities market responsibilities. This move would position ESMA as the central authority for ensuring compliance with MiCA requirements across all member states, creating a more streamlined and efficient regulatory environment for crypto businesses operating in the EU.

Villeroy de Galhau’s argument for ESMA-led supervision emphasizes the importance of consistent rule interpretation and enforcement. Under the current framework, differences in national regulatory approaches could lead to uneven implementation of MiCA provisions, creating potential loopholes and compliance challenges for cross-border crypto operations. Centralized oversight by ESMA would address these concerns by establishing uniform standards and procedures throughout the single market.

The Bank of France governor’s advocacy for ESMA’s expanded role comes at a critical juncture as the EU prepares for the full implementation of the MiCA framework. By proposing this structural enhancement now, European authorities have the opportunity to build a robust supervisory system from the outset rather than attempting to retrofit centralized oversight after potential regulatory failures or market disruptions occur.

The Bank of France’s proposals, if adopted, would fundamentally reshape the regulatory landscape for crypto assets in the European Union. By establishing ESMA as the primary supervisor for major crypto firms and strengthening stablecoin regulations, the EU would create one of the most comprehensive and centralized crypto regulatory frameworks among major global economies.

This approach could enhance market confidence by providing clearer rules and more consistent enforcement, potentially attracting more institutional participation in European crypto markets. However, it also raises questions about the balance between centralized oversight and national regulatory autonomy, particularly for smaller member states that may have different priorities or capacities for supervising crypto activities.

The timing of Villeroy de Galhau’s announcement at the ACPR-AMF Fintech Forum signals the urgency with which European authorities view the need for coordinated crypto regulation. As global competition in digital assets intensifies, the EU’s ability to establish a coherent and effective regulatory framework will be crucial for determining its position in the emerging digital economy and protecting its financial sovereignty in an increasingly interconnected world.