EU Plans to Expand Central Supervision to Crypto and Stock Exchanges Under New ESMA Mandate

The European Commission is preparing a sweeping overhaul of financial market oversight that would bring stock exchanges, cryptocurrency trading platforms, and clearing houses under central EU supervision.

The initiative aims to address fragmentation across Europe’s financial landscape and strengthen the bloc’s competitiveness against the United States.

Currently, dozens of national and regional regulators oversee hundreds of trading and post-trade institutions across the EU — a system that Brussels believes raises transaction costs and complicates cross-border operations. This fragmented structure has been cited as a key obstacle preventing European start-ups from scaling up efficiently within the single market.

The Commission’s new plan envisions a single supervisory authority modeled on the U.S. Securities and Exchange Commission (SEC), which would mark a decisive step toward completing the long-discussed “capital markets union.” The move has already received support from European Central Bank President Christine Lagarde and her predecessor, Mario Draghi, who highlighted the need for stronger financial integration in a report on boosting Europe’s competitiveness published last year.

The European Commission confirmed that it will present a “market integration package” in December. The most debated proposal involves extending the powers of the European Securities and Markets Authority (ESMA) to oversee “the most significant cross-border entities,” according to sources familiar with the matter. These entities would include stock exchanges, cryptocurrency service providers, and post-trade infrastructures such as central clearing counterparties and central securities depositories.

Under the proposal, ESMA would also assume a new role as an arbiter in disputes between large asset managers. While it would not directly supervise these institutions, ESMA would issue binding decisions in cases of disagreement between national regulators.

Germany, which has historically resisted centralised supervision, appears to be softening its stance. The government led by Chancellor Friedrich Merz is reportedly exploring options with France, a strong advocate of deeper financial integration and the capital markets union.

Berlin could support ESMA oversight in the asset management sector, though it remains opposed to extending such authority to cryptocurrency exchanges.

However, some smaller EU member states continue to voice skepticism. Luxembourg and Dublin, both major financial centers, have expressed reservations about handing supervisory power to ESMA. They argue that such a move could harm their national interests and reduce competitiveness in their domestic markets.

“We would like to have [supervisory] convergence instead of creating a costly and inefficient central model,” said Gilles Roth, Luxembourg’s finance minister.

Industry groups have also expressed concern. A European exchange group said it saw “no benefit” in transferring oversight of cryptocurrency service providers to ESMA, citing strong cooperation with national regulators and fears of increased compliance costs.

“Expanding ESMA’s supervisory powers would mean higher fees paid by the industry,” said Marin Capel, policy advisor at EFAMA, the European Fund and Asset Management Association.

Despite the pushback, the Commission remains committed to exploring EU-level supervision for what it calls “critical infrastructures.” A committee spokesperson stated that it is “continuing to explore the possibilities for EU-level supervision in relation to certain critical infrastructures, such as central counterparties, central securities depositories and trading venues, as well as in relation to large cross-border entities such as asset managers.”

“We are looking at different models for single supervision… from the perspective of balancing EU interest with local expertise,” the spokesperson added. 

By fLEXI tEAM