The European Commission is reportedly preparing a major regulatory shake-up that could shift cryptocurrency oversight from national regulators to the European Securities and Markets Authority (ESMA).
According to a Financial Times report, EU lawmakers are drafting new rules that would give ESMA direct supervision of crypto companies a move aimed at creating more consistent oversight across the bloc’s 27 member states.
However, the proposal has already sparked pushback from smaller EU countries like Malta and Luxembourg, which fear losing control over their national regulatory frameworks and competitive edge in attracting crypto businesses.
EU Eyes Centralized Crypto Oversight Under ESMA
Under the draft proposal, the European Commission wants to give ESMA broader powers not only over crypto firms, but also over stock exchanges and clearinghouses.
The goal, according to ESMA Chair Verena Ross, is to make supervision across European capital markets more uniform and efficient.
“It also means that people had to build up specific new resources and expertise 27 times in different national supervisors, which could have been done more efficiently once at a European level,” Ross told the Financial Times.
While ESMA’s expanded authority had been floated during the development of MiCA (Markets in Crypto-Assets Regulation), it was never fully implemented. The new reform could change that effectively turning ESMA into the main regulator for crypto asset service providers (CASPs) across the EU.
Malta and Luxembourg Push Back
The idea of centralized regulation hasn’t gone down well with smaller EU nations.
Malta one of the first countries to issue CASP licenses under MiCA has positioned itself as a crypto-friendly hub and fears losing autonomy. As of July 2025, Malta had issued at least five MiCA-compliant CASP licenses, including approvals for Crypto.com and OKX.
In July, ESMA reportedly criticized Malta’s licensing process, suggesting that “some risk areas were not adequately assessed” during one firm’s approval.
Luxembourg, another strong advocate of financial independence, echoed similar concerns. Claude Marx, head of Luxembourg’s financial regulator CSSF, warned that giving ESMA full control over all investment and crypto markets could create what he called a “monster regulator.”
“It is a fantasy that the European Commission wants to push a single supervisor. The Commission has always said they do not have an idée fixe to have a European SEC,” Marx said.
Why ESMA’s Role Is So Controversial
Founded in 2011, ESMA was designed to harmonize financial market rules across Europe. But in practice, most financial oversight still happens at the national level.
Critics argue that shifting crypto regulation to ESMA could create a one-size-fits-all framework that may stifle innovation, particularly for smaller countries that have built agile, pro-innovation ecosystems.
Supporters, on the other hand, believe that a centralized supervisor could help reduce regulatory fragmentation and make enforcement more consistent across borders a long-standing goal of the EU’s Capital Markets Union project.
The Road Ahead
The proposal is still in the drafting stage, and any decision to expand ESMA’s powers would require approval from the European Parliament and member states.
If adopted, it would mark one of the biggest shifts in EU financial governance since MiCA’s rollout and could reshape how crypto firms operate within Europe.
For now, the debate highlights a familiar European tension: balancing harmonization and innovation, and finding common ground between large EU economies and smaller financial hubs.
