The European Commission’s proposal to expand the powers of the European Securities and Markets Authority (ESMA) raises concerns about the centralization of the bloc’s licensing system, despite signaling deeper institutional ambitions for the structure of capital markets.
On Thursday, the Commission published a package proposing “direct supervisory powers” for key elements of market infrastructure, including crypto asset service providers (CASPs), trading venues and ESMA central counterparties, Cointelegraph reported.
Interestingly, ESMA’s jurisdiction would extend to both supervision and licensing of all European cryptocurrency and financial technology (fintech) companies, potentially leading to slower licensing regimes and making it more complex for startups to thrive, according to Faustine Fleuret, head of public affairs at decentralized lending protocol Morpho.
“I am even more concerned that the proposal gives ESMA responsibility for both the authorization and supervision of CASPs, rather than just supervision,” she told Cointelegraph.
The proposal still requires approval by the European Parliament and the Council, which is currently subject to negotiations.
If adopted, ESMA’s role in overseeing EU capital markets will more closely resemble the centralized framework of the US Securities and Exchange Commission – a concept first proposed by European Central Bank (ECB) President Christine Lagarde in 2023.
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The EU’s plan to centralize licensing under ESMA raises concerns about a slowdown in the cryptocurrency and fintech industries
The proposal to “centralize” this oversight under a single regulator aims to address differences in national supervisory practices and unequal licensing regimes, but risks slowing the overall growth of the crypto industry, Elisenda Fabrega, general counsel of asset tokenization platform Brickken, told Cointelegraph.
“Without adequate resources, this mandate may prove impossible to implement, potentially leading to delays or overly cautious assessments that may disproportionately impact smaller or innovative companies.”
“Ultimately, the effectiveness of this reform will depend less on its legal form and more on its institutional implementation,” including ESMA’s operational capacity, independence and “channels” of cooperation with member states, she added.
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The broader package aims to boost wealth creation for EU citizens by making the bloc’s capital markets more competitive compared to US markets.
According to data from the US stock exchange, the stock exchange is worth approximately $62 trillion, accounting for 48% of the global stock market, while the cumulative value of the EU stock market is approximately $11 trillion, accounting for 9% of the global share. data from Visual Capitalist.
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