According to Silicon Republic, the European Commission is preparing proposals to expand the European Securities and Markets Authority’s powers to create SEC-style supervision for crypto assets, stock exchanges, and clearing houses. The upcoming “market integration package,” expected in December, would give ESMA binding decision-making authority in disputes between national supervisors and large asset managers. The move aims to address fragmentation across EU financial markets and bolster competitiveness against the US by preventing companies from moving across the Atlantic for scaling opportunities. However, national capitals including Luxembourg and Dublin are reportedly hesitant to surrender decision-making powers to the Paris-based ESMA, creating potential roadblocks for the initiative that forms part of broader efforts to complete the EU’s Capital Markets Union.
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The Coming Sovereignty Battle
What Silicon Republic’s report hints at but doesn’t fully explore is the constitutional earthquake this represents for EU financial governance. National financial regulators have historically guarded their turf fiercely, and the proposal to give ESMA “last say” on disputes represents a fundamental shift toward centralized financial supervision. We’ve seen similar battles play out with banking supervision through the Single Supervisory Mechanism, but extending this to capital markets and crypto represents an even more complex challenge. The resistance from financial hubs like Luxembourg and Dublin isn’t just bureaucratic inertia—these jurisdictions have built significant economic infrastructure around their financial services industries and won’t surrender oversight lightly.
The Crypto Wild Card
The inclusion of crypto assets service providers in this expansion is particularly significant given the EU’s recent passage of MiCA legislation. While MiCA established the regulatory framework, this new proposal addresses the supervision gap. The current patchwork of 27 national approaches to crypto oversight creates exactly the kind of fragmentation the Commission wants to eliminate. However, crypto presents unique challenges that traditional securities markets don’t—cross-border nature, technological complexity, and evolving risks that many national regulators are still struggling to understand. Centralizing authority in ESMA could either create more consistent oversight or overwhelm an agency that’s still building its crypto expertise.
The Competitive Reality Check
The Commission’s stated goal of improving competitiveness against the US faces several practical hurdles. While streamlined supervision might reduce regulatory complexity, it doesn’t address the fundamental structural advantages of US capital markets—depth, liquidity, and the concentration of venture capital that makes scaling easier. The EU’s recent Scaleup Europe Fund announcement acknowledges this gap, but regulatory harmonization alone won’t solve it. More concerning is the risk that during the transition to centralized supervision, uncertainty could actually worsen the very fragmentation problem the Commission wants to solve, potentially driving more companies to seek funding outside Europe during the implementation period.
Implementation Timeline and Challenges
The December timeline for proposals seems ambitious given the sovereignty issues at stake. Even if the Commission pushes forward, we’re likely looking at a multi-year implementation process with significant transitional arrangements. The experience with banking union suggests that national regulators will fight for grandfathering provisions, phase-in periods, and exceptions that could dilute the centralized approach. The technical challenge of integrating supervision across diverse markets—from established stock exchanges to emerging crypto platforms—shouldn’t be underestimated either. ESMA will need substantial new resources and expertise, particularly in the crypto space where regulatory approaches are still evolving globally.
Broader Capital Markets Union Implications
This move represents the most significant step toward completing the Capital Markets Union since the project began nearly a decade ago. The Commission appears to be taking the lesson from previous CMU initiatives that lacked enforcement teeth. However, the risk is that by pushing centralized supervision as the solution, the Commission might trigger backlash that sets back the broader CMU agenda. The success of this initiative will depend heavily on whether the Commission can craft a compromise that gives ESMA meaningful authority while preserving enough national flexibility to keep key financial centers onboard. If they get this balance wrong, the entire CMU project could face renewed skepticism from both markets and member states.
