EU to Expand ESMA Powers for Unified Crypto & Financial Market Oversight

• Crypto regulation is to move under ESMA for unified supervision across the EU.
• The plan aims to cut regulatory costs and improve transparency in financial markets.
• Centralized oversight seeks to unify EU markets and strengthen investor confidence.

The European Union is preparing a big initiative to transfer the regulation of the crypto and financial markets to the European Securities and Markets Authority (ESMA). The initiative aims to consolidate the fragmented diversification of national regulators into a unified body. The aim is to reduce regulatory costs, enhance transparency, and boost investor confidence within the bloc.

The Financial Times reports that the European Commission will increase ESMA with the mandate to supervise stock and crypto exchanges. Asset service providers and trading platforms would also be covered by the new structure. This legislation is a step that goes towards a single capital market, which is a long-term aim of the European Union and is of the centralized type adopted by the United States.

The existing regulatory system is based on individual national agencies. This imposes restrictions on startups and imposes additional burdens on cross-border trade. Supporters believe that with a single supervisor, the process of rules will not become so complicated, and larger firms will have greater access to the market.

EU Plans to Grant ESMA Binding Powers in Crypto and Financial Disputes

European Central Bank (ECB) President Christine Lagarde favors a central organization. She has proposed a wide mandate that will be directly supervised in order to control systemic risk associated with large cross-border institutions. Her stance aligns with the EU’s broader efforts to create a real capital markets union.

Also Read: EU Expands ESMA Authority, Unifying Crypto and Financial Market Supervision

The Commission plans to present a draft of the proposal in December. According to sources, ESMA shall also be empowered to make binding decisions in cases of dispute among asset managers. It has the potential to step into national regulators’ disagreements, streamlining the decision-making process.

The strategy follows along with the increasing focus on crypto regulation among policymakers. The Markets in Crypto-Assets Regulation (MiCA) allows firms licensed in a country to apply a passport system across 27 countries. Other countries, such as France, Austria, and Italy, however, have considered that inequitable enforcement undermines supervision.

France Threatens to Ban Crypto Passporting, Urges ESMA-Led Supervision

In September, the securities regulator in France threatened to prohibit passporting in case regulatory loopholes persisted. Authorities consider the centralization of supervision through ESMA a means to have fairer and stricter compliance standards among crypto companies with operations in the EU.

In October, the ESMA Chair Verena Ross confirmed in an interview that negotiations on financial industry oversight transfer to the ESMA are underway. She stated that the change aims to address persistent market fragmentation.

The proposal, in case of such implementation, would be a giant step towards unified supervision. It would increase the stability in financial operations and unify the crypto market.

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