According to Bloomberg, the European Union's executive body is planning to promote a far-reaching regulatory reform. It intends to elevate the European Securities and Markets Authority (ESMA) to become the direct supervisor for cryptocurrency service providers across the entire region and grant it the power to approve new market entrants. This draft is expected to be officially announced next month. Its implementation could fundamentally alter the long-established distribution of powers and responsibilities among EU member states in the field of cryptocurrency regulation and significantly impact the industry's current operational models.
Under the current EU Markets in Crypto-Assets Regulation (MiCA), crypto asset service providers only need to obtain authorization in any single EU member state to operate throughout the entire EU. While this "single passport" mechanism has, to some extent, promoted market integration and efficiency, it has also sparked controversies such as regulatory arbitrage and fragmented standards due to varying regulatory scales and enforcement levels among countries. For instance, some companies might prefer to register in member states with more lenient regulations to circumvent stricter compliance requirements. This fragmented regulatory state not only weakens the overall effectiveness of supervision but may also increase systemic risks.
The reform proposed by the EU this time aims to establish a more unified, transparent, and enforceable regulatory framework by centralizing supervisory functions. As an EU-level financial regulatory authority, ESMA will in the future be directly responsible for the approval and daily supervision of Crypto-Asset Service Providers (CASPs), including exchanges, custodial service providers, and crypto asset issuers. This change means that companies will no longer rely on authorization from individual member states but will need to demonstrate directly to ESMA that they comply with EU-level governance standards, capital requirements, and operational norms.
If this policy shift is ultimately implemented, it will profoundly affect the competitive landscape and regulatory culture of the EU crypto market. On one hand, centralized supervision is expected to improve regulatory efficiency, enhance market transparency, and reduce legal uncertainties caused by differences in national systems, thereby attracting more compliant capital and innovative companies to the EU market. On the other hand, for companies already authorized in certain member states, they may face practical challenges such as heightened regulatory standards, increased compliance costs, and even the need to re-adapt to a new approval process led by ESMA.
Furthermore, this move also reflects the EU's strategic ambition in digital financial governance. At a time when global cryptocurrency regulation has not yet formed unified standards, the EU attempts to strengthen ESMA's functions to establish its own voice in setting rules for digital assets, thereby leading international regulatory cooperation and standard export. As some analyses point out, the EU hopes to use a more integrated regulatory system to balance financial innovation and risk prevention, while simultaneously seizing institutional advantages in the digital economy competition landscape.
However, this reform may also face resistance from member states regarding the transfer of regulatory powers. After all, some national regulatory authorities have already invested significant resources in the cryptocurrency field and developed their own regulatory practices and interest structures. How to balance unified EU supervision with member state autonomy will be a key issue for negotiation during the subsequent legislative process of the draft.
Overall, the EU's proposed regulatory reform is not only an adjustment at the institutional level but also an important exploration into the standardization and institutionalization of the crypto asset industry. Its implementation effects will not only concern the future direction of the European crypto market but may also provide regulatory paradigms and policy references for other regions globally.
