The European Union is preparing to centralize financial supervision across the bloc by giving the European Securities and Markets Authority (ESMA) sweeping new powers over cryptocurrency firms, stock exchanges, and clearing houses, in what could become the most significant overhaul of EU market governance in decades.
According to early drafts of the proposal, expected to be unveiled by the European Commission in December 2025, ESMA would assume direct oversight of large, cross-border market infrastructures, a responsibility currently held by national regulators in individual member states. The move is aimed at reducing fragmentation, cutting bureaucracy, and strengthening Europe’s competitiveness against global financial hubs such as the United States and the United Kingdom.
Centralized Supervision to End Fragmentation
Under the new framework, ESMA would have the authority to license, monitor, and enforce compliance for financial institutions operating across multiple EU jurisdictions. This includes major crypto platforms, clearing houses, and trading exchanges, ensuring a unified application of EU financial rules such as MiCA (Markets in Crypto-Assets Regulation) and EMIR (European Market Infrastructure Regulation).
ESMA Chair Verena Ross said the reform would finally address one of the EU’s long-standing weaknesses, the patchwork of national regulators applying rules differently. “Centralized supervision will help eliminate inconsistencies and strengthen market trust,” Ross stated, emphasizing that fragmented oversight has led to inefficiencies and uneven enforcement.
Boosting Competitiveness Against Global Rivals
By consolidating regulatory control, Brussels hopes to create a fully integrated European capital market, capable of rivaling Wall Street and London. The proposal aligns with the EU’s broader Capital Markets Union initiative, which seeks to make it easier for companies to raise funds and for investors to operate seamlessly across borders.
Officials believe that a single supervisory authority could make the EU’s financial markets more agile, transparent, and attractive to global investors, particularly as digital assets and tokenized securities become central to the next generation of financial infrastructure.
Resistance from Smaller Member States
However, the proposal has already sparked pushback from smaller member states such as Malta and Luxembourg, which have built strong financial sectors under their own regulatory frameworks. Critics warn that transferring control to ESMA could erode local autonomy and weaken smaller financial centers that rely on flexible oversight to attract global firms.
Some national regulators also fear that excessive centralization could slow down decision-making and overlook regional market nuances, while others argue that a single supervisory model is essential to prevent regulatory arbitrage.
Governance and Timeline
To support its expanded mandate, ESMA’s governance structure would be reformed with the creation of an independent executive board and a revised funding model, reflecting its role as a pan-European authority rather than a coordination body.
The European Commission is expected to publish the full legislative proposal in December 2025, with discussions likely to feature prominently during the upcoming EU leaders’ summit later that month. If adopted, the reform could reshape the landscape of European finance, marking a decisive shift toward a single, unified regulatory regime for both traditional and digital markets.