EU's Big Move on Crypto: Innovation at Risk?

The European Union is making waves with a plan to give the European Securities and Markets Authority (ESMA) more power over cryptocurrency and stock markets. This move aims to create a unified regulatory system, much like the one in the U. S. But not everyone is on board. The EU is thinking about letting ESMA directly oversee stock exchanges and crypto service providers. This could mean a one-size-fits-all approach to regulation. The plan is expected to be unveiled in December. Currently, under the Markets in Crypto-Assets Regulation (MiCA), crypto companies licensed in one EU country can operate across all 27 member states. This is a big deal for the industry. But some people worry that giving ESMA too much control could slow down innovation, especially for crypto and fintech startups. Faustine Fleuret, who works at Morpho, a decentralized lending protocol, thinks this could be a problem. She believes that centralizing all decision-making in Brussels might not be the best idea. Fleuret suggests a different approach: giving ESMA more power over national regulators instead of taking all control away from them. She also points out that the EU passporting system, which allows companies to operate across the bloc, is crucial for competition. In September, France's securities regulator hinted at banning the passporting of crypto licenses, which raised some eyebrows. This move could create gaps in the EU's regulatory framework. On the other hand, some experts see ESMA's expanding role as a good thing. Dea Markova, from Fireblocks, thinks that centralizing control could help address issues like licensing, cybersecurity, and custodial risks. However, she warns that the success of this plan depends on how it's implemented and funded. Even the European Central Bank's President, Christine Lagarde, has shown support for the idea of a single supervisory body, similar to the SEC in the U. S.