EU Plans Central Oversight for Crypto and Stock Market Entities

In Brief

• EU proposes centralizing supervision of major stock, crypto, and clearing platforms under ESMA.
• France and Germany back the move, but Ireland, Luxembourg, and Malta raise concerns.
• Reform aims to improve investor protection and reduce regulatory arbitrage across the EU.

The European Commission is drafting legislation to expand central oversight of major financial market infrastructures. The proposal would give the European Securities and Markets Authority (ESMA) direct authority over systemically important stock exchanges, clearing houses, and crypto asset service providers.

The initiative is designed to reduce regulatory fragmentation and strengthen the EU’s global competitiveness through the Capital Markets Union. Currently, each EU member state regulates these institutions separately, leading to inefficiencies and inconsistent standards.

Under the new framework, ESMA would oversee cross-border entities while national authorities maintain supervision of smaller, local firms. This model aims to streamline regulation and improve enforcement across the bloc’s internal market.

The Commission plans to present the legislative package in December as part of its broader market integration strategy. The draft law will also include mechanisms for resolving disputes between national regulators over large cross-border financial operations.

Mixed Reactions from Member States and Financial Industry

France and Germany support the proposal, citing reduced regulatory arbitrage and improved oversight of financial services across borders. However, Luxembourg, Ireland, and Malta oppose it, arguing that it weakens local expertise and competitiveness.

Some industry groups also express concerns about increased compliance burdens and reduced flexibility under centralised regulation. They prefer working with national regulators who offer more tailored supervision.

For crypto firms, the reform would replace national “passporting” with direct ESMA oversight for large-scale service providers. This change may improve investor protection and reduce opportunities for regulatory shopping.

Exchanges and post-trade institutions operating across several countries would also face ESMA as their single supervisory body. The Commission believes the plan balances central enforcement with national involvement, supporting integration without full centralisation.