EU Crypto Regs Torn Between Centralized Control and Local Expertise

The European Commission is pushing for a sweeping overhaul of crypto regulation in the EU, proposing that the European Securities and Markets Authority (ESMA) assume direct oversight of all crypto firms operating in the bloc. This shift would replace the Markets in Crypto-Assets (MiCA) framework's national regulator model, sparking concerns among industry groups and experts about legal uncertainty, resource constraints, and the potential disruption of MiCA's implementation timeline.

Under the current MiCA rules, crypto firms must secure authorization in one EU member state to operate across the bloc via a "passporting" system. National regulators have spent years preparing for this structure, with the implementation window set to close in 2026. However, the Commission's draft proposal would transfer much of this authority to ESMA, including the power to approve new entrants. While ESMA could delegate tasks to national authorities, the centralization of oversight would significantly dilute the role of local regulators.

Industry leaders have raised alarms. Robert Kopitsch, secretary general of Blockchain for Europe, warned that reopening MiCA at this stage risks destabilizing its rollout, creating legal ambiguity, and diverting resources from its consistent implementation. He emphasized that national regulators maintain closer, day-to-day engagement with firms, a dynamic ESMA cannot easily replicate. Similarly, Andrew Whitworth of Global Policy Ltd. noted that ESMA would require a "major boost in resources" to handle the workload currently managed by national supervisors.

The proposal aligns with broader efforts by EU policymakers to centralize financial market oversight, including expanding ESMA's authority over clearing houses and trading venues. France has been a vocal proponent, with Bank of France Governor François Villeroy de Galhau arguing that centralized oversight would close regulatory loopholes and ensure consistent enforcement under MiCA. ESMA Chair Verena Ross has also hinted at the potential efficiency gains of a centralized model, questioning whether the current system of 27 national regulators is optimal.

Critics, however, caution that the timing of the proposal is problematic. National regulators are already navigating the complexities of MiCA implementation, and shifting responsibilities to ESMA could delay authorizations and complicate compliance for firms. In July 2025, ESMA itself raised concerns about Malta's crypto licensing process, highlighting the need for rigorous standards.

The plan, still in draft form, requires approval from the European Parliament and the Council of member states. If adopted, it could mark a pivotal shift in EU financial governance, balancing centralized oversight with localized flexibility. For now, the debate underscores the tension between regulatory efficiency and the practical realities of managing a fragmented, high-risk industry.