ESMA Plan Raises Fears of Slower Crypto Growth

The European Commission has reignited debate around the future of the EU crypto market. A newly published proposal that would significantly expand the powers of the European Securities and Markets Authority (ESMA) has raised concerns among lawyers and fintech leaders. If adopted, ESMA could shift toward a model closer to the U.S. Securities and Exchange Commission – a centralized regulator with direct oversight of key financial infrastructure. Experts warn that such a move could slow down licensing for European crypto companies.

Licensing under one roof? Startups warn of stalled innovation

The Commission recently introduced a reform package that would give ESMA direct supervisory authority over markets – including crypto-asset service providers (CASPs), trading platforms, and central counterparties.

Critics argue that this marks a fundamental shift in the philosophy of EU oversight. ESMA would not only supervise but also license European crypto firms and fintech companies.

“I’m particularly concerned that the proposal gives ESMA responsibility for both authorization and supervision of CASPs, not just supervision,” says Faustine Fleuret, head of public affairs at the decentralized lending protocol Morpho.

Centralizing decision-making, she warns, could slow processes, extend wait times, and discourage smaller technology projects already struggling under complex regulatory requirements.

An ambitious step that may slow the market

Brussels says the reform aims to unify fragmented national approaches and strengthen the European capital market so it can better compete with the United States.

Skeptics caution, however, that centralization without well-designed processes could have the opposite effect.

Elisenda Fabrega, general counsel at the tokenization platform Brickken, notes that the real impact will depend on ESMA’s ability to implement the reform in practice. Capacity, independence, and effective cooperation with member states will be essential.

The proposal is not final and must still be negotiated in the European Parliament and the Council of the EU.

Europe wants to catch up with the U.S. – but the gap is wide

The reform is part of a broader strategy to strengthen EU capital markets and create conditions capable of competing with the U.S. financial ecosystem. Yet data shows the EU has a long way to go.

According to Visual Capitalist, the U.S. stock market is worth around $62 trillion – nearly half of the global equity market. The European Union, at approximately $11 trillion, represents only 9% of the global total.

This is why the EU is looking for tools to concentrate capital, streamline processes, and attract global investors. Centralizing licensing under ESMA is one such tool – though it may come at the cost of slower development in crypto and fintech.

What comes next?

The proposal now awaits political decision-making. If approved, it would mark the most significant shift toward a unified EU capital market in decades. But it also risks placing new regulatory barriers in the path of innovation – from crypto projects to fintech startups.

The outcome will shape not only the future of the European crypto ecosystem but also the EU’s broader ambition to become a global center of digital finance.

Sources:

https://ec.europa.eu/commission/presscorner/detail/en/ip_25_2893

https://cointelegraph.com/news/european-sec-proposal-licensing-concerns