Does the EU want to centralize encryption regulation? The new proposal aims to give the European ESMA full authority to regulate the encryption industry.

According to Bloomberg, the European Commission is pushing for a new proposal to centralize the authorization and regulatory powers of large crypto asset service providers to the European Securities and Markets Authority (ESMA). (Executive summary: ESMA Europe warns of 'tokenized shares' too dangerous: digital credentials have no shareholders' rights; Will it hinder innovation in Taiwan? (Background supplement: ECB: Digital euro is expected to be launched in 2029, but only if relevant legislation is completed in 2026) According to Bloomberg, the European Commission is actively pushing for a major regulatory reform, with plans to significantly expand the powers of the European Securities and Markets Authority (ESMA), which will directly responsible for the authorization and day-to-day supervision of crypto asset service providers (CASPs) across the EU, while still delegating some of the business to national regulators under certain circumstances. The reform is seen as a key step in the integration of EU capital markets and is expected to be formally released as a “Markets Integration Package” in December 2025. Specific content of the proposal Currently, the European Union has implemented the Crypto Asset Market Regulation (MiCA) in phases since June 2024. The authorisation and regulatory requirements for service providers such as cryptocurrency exchanges, wallets and custodians came into full effect on December 30, 2024. These operations are mainly regulated by member states, e.g. Malta is under the responsibility of the Financial Services Authority (MFSA) and Luxembourg is under the responsibility of the Commission for the Supervision of the Financial Sector (CSSF). However, although MiCA allows a “passport” mechanism, allowing operators to pass in 27 countries after obtaining a license in a single country, it has actually caused different regulatory standards, duplicate waste of resources, and the phenomenon of “regulatory arbitrage” in which enterprises choose countries with loose supervision. Therefore, according to the latest proposal of the European Commission, in the future, the authorization and day-to-day supervision of “major cross-border operators” will be directly taken over by ESMA, similar to the single supervisory mechanism (SSM) of the US SEC or the eurozone banking sector; For smaller or less risky operators, ESMA can entrust national regulators to implement on their behalf, forming a hybrid model of “central leadership, local assistance”. The draft is expected to be sent to the European Parliament and the Council for consideration in December 2025, and if successfully passed, ESMA's new powers will be phased in as early as 2026, and may even be extended to equity and bond pricing agencies and ESG rating agencies in the future. Differences remain within the EU It is worth noting, however, that the proposal has sparked fierce controversy within the EU. Regulators in France, Austria, Italy and other countries strongly support the European Central Bank, believing that only centralized supervision can truly unify standards, avoid Malta and other countries from becoming regulatory loopholes, and enhance the overall competitiveness of the EU; Opposition comes mainly from crypto powerhouses such as Malta, Luxembourg and Ireland, who fear that excessive concentration of power will stifle innovation, increase compliance costs, and weaken the local financial ecosystem. Related reports ECB: The digital euro will launch a pilot as soon as 2027 and will be launched in 2029, but only if the legislation is completed in 2026 The ECB finalizes technical cooperation on the digital euro and signs a framework agreement with seven companies ECB: The digital euro is expected to be launched in 2029, but only if the relevant legislation is completed in 2026 (EU crypto supervision should be centralized? The new proposal proposes to give ESMA Europe full authority to regulate the crypto industry" This article was first published in BlockTempo's “Dynamic Trend - The Most Influential Blockchain News Media”.