The European Central Bank has thrown its weight behind a proposal to give the EU’s markets watchdog direct control over the continent’s largest crypto firms.
Summary
- The European Central Bank has endorsed a plan to transfer oversight of large crypto firms and cross-border trading platforms to the European Securities and Markets Authority.
- The central bank warned that centralized supervision is necessary to prevent financial shocks from migrating into the traditional banking system as the two sectors become increasingly linked.
- Implementation of the new regime faces opposition from member states like Malta that argue the current regulatory framework is too new to be overhauled.
The ECB issued a formal opinion on Friday stating that it fully supports moving the oversight of “systemically important” cross-border entities, including major trading platforms and crypto-asset service providers (CASPs), to the European Securities and Markets Authority (ESMA).
According to the central bank, these proposals “constitute an ambitious step towards deeper integration of capital markets and financial market supervision within the Union.”
While the opinion does not legally bind lawmakers, it provides significant political momentum for what would be the most substantial change to EU digital asset rules since the Markets in Crypto-Assets (MiCA) framework began its rollout in 2023.
Curbing “forum shopping” in the crypto sector
Under current MiCA rules, crypto firms can obtain a license in a single EU member state and then “passport” those services across the entire bloc. This setup has led to a fragmented landscape where companies select specific countries based on favorable local oversight.
For instance, Kraken operates out of Ireland, while Coinbase and Bitstamp are based in Luxembourg. Bitpanda maintains its primary presence in Austria, though its asset management division is registered in Germany.
The central bank argues that “transferring authorisation, monitoring and enforcement powers for all CASPs” from national bodies to ESMA would “ensure supervisory convergence, reduce fragmentation and mitigate cross-border risks in crypto-asset markets, thereby supporting financial stability and the integrity of the single market.”
Opposition to the change has emerged from countries like Malta, a prominent hub for digital asset firms. Critics there argue the move is premature, noting that specific MiCA requirements for service providers only became fully active in December 2024.
The ECB, however, pointed to the growing ties between traditional lenders and the crypto industry as a reason for urgency. It warned that banks offering crypto services or partnering with digital asset firms could allow volatility to transmit “shocks into the financial system.”
To prevent this, the bank highlighted “the need for a centralised Union supervisory regime for CASPs, capable of addressing the systemic risks posed by CASPs with significant activities, preventing risk migration into the banking system and safeguarding financial stability.”
For the plan to succeed, the ECB noted that ESMA must receive enough funding and personnel to manage the increased workload of policing the sector. The proposal now moves to a period of negotiation between EU governments and lawmakers, meaning it will likely be several months before the changes are finalized in law.
