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The European Commission is examining strategies to subject stock and cryptocurrency exchanges to centralized oversight as a component of a wider initiative to enhance the bloc’s capital markets’ competitiveness against those in the US.
The forthcoming proposition would broaden the authority of the European Securities and Markets Authority’s (ESMA) to encompass stock and crypto exchanges, along with crypto asset service providers and additional trading infrastructure, as reported by the Financial Times on Saturday.
The EU’s existing environment consists of multiple national and regional regulatory bodies, which significantly escalates the expense of cross-border trade, impeding the growth of startups in the area.
Establishing a unified supervisory entity similar to the US Securities and Exchange Commission (SEC) might be a subsequent move for the EU’s “capital markets union,” also supported by European Central Bank (ECB) President Christine Lagarde.
“Forming a European SEC, for instance, by amplifying the capabilities of ESMA, could be a viable solution. It would require a comprehensive mandate, encompassing direct oversight, to alleviate systemic threats posed by significant cross-border entities,” Lagarde stated at the European Banking Congress in November 2023.
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The commission is expected to unveil a draft in December, per individuals acquainted with the situation who talked to the FT.
The proposal would also empower ESMA to have the final determination in conflicts amongst asset managers, issuing mandatory decisions without direct oversight.
France evaluates halting license “passporting,” raising MiCA apprehensions
The EU’s unified oversight model may mitigate worries associated with crypto service providers pursuing licenses under more lenient regulatory environments.
In September, France’s securities authority threatened to prohibit crypto license “passporting” under the Markets in Crypto-Assets Regulation (MiCA) framework, raising alarms about enforcement deficiencies within the EU’s regulatory system.
France also became the third nation to urge the Paris-based ESMA to assume oversight of prominent crypto firms, following Austria and Italy.
Under MiCA, effective for crypto-asset service providers starting December 2024, entities authorized in one member state can utilize that license as a “passport” to operate throughout the 27-nation alliance.
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Verena Ross, ESMA chair, also affirmed the commission’s intentions to shift financial sector supervision from national bodies to ESMA in October.
Ross indicated that the proposition aims to tackle “ongoing disunity in markets” and move closer to a cohesive capital market throughout Europe.
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