The EU plans to transform ESMA into a "European SEC" to unify the regulation of encryption and traditional markets.

The EU plans to centralize the regulatory authority over stock and crypto exchanges under ESMA, hoping to reduce market fragmentation and lower costs for startups. However, member states still have concerns about sovereignty and innovation risks (Background: European Central Bank: The digital euro is expected to pilot in 2027 and go live in 2029, provided that legislation is completed by 2026) (Supplementary background: The European Central Bank has finalized technology cooperation for the digital euro, signing framework agreements with seven companies). A recent milestone proposal has emerged from the financial roundtable in Brussels and Frankfurt: to directly assign regulatory authority over stock and cryptocurrency exchanges within the EU to the European Securities and Markets Authority (ESMA), creating a European version of the SEC. This move aims to break the long-standing fragmented regulatory landscape, broaden funding channels for startups, and reinforce the loopholes in the cross-border licensing of the Markets in Crypto-Assets Regulation (MiCA). Centralizing regulatory authority: Correcting fragmentation. Currently, the 28 member states set their own regulatory standards, requiring repeated licensing applications for cross-border transactions, which increases capital costs. The European Commission plans to propose a draft in December 2024, authorizing ESMA to directly enforce regulations on stock and crypto exchanges, eliminating institutional discrepancies and improving the Capital Markets Union blueprint. European Central Bank President Lagarde publicly called for a 'European SEC with comprehensive authority to directly regulate markets' as early as November 2023. ESMA Chair Verena Ross followed up in October 2024, emphasizing that centralized regulation can 'address the ongoing fragmentation of the market.' If legislative progress is smooth, negotiations are expected to extend until 2026, providing a clear timeline for market participants. Addressing the MiCA 'passporting' gap. Once MiCA goes into effect in December 2024, it allows crypto service providers to operate cross-border after obtaining certification in any member state through a 'passporting' process. However, varying regulatory thresholds create arbitrage opportunities, allowing operators to first obtain licenses in jurisdictions with lower requirements before entering larger markets like France and Germany. France, Austria, and Italy have already warned Brussels, demanding that ESMA directly regulate large suppliers to ensure consistent rules. If ESMA's powers are successfully expanded, it could enhance transparency and prevent regulatory loopholes from undermining market trust. Gains and losses for startups. After centralized regulation, the administrative and compliance costs for multinational entities are expected to decrease by about 15%, streamlining the listing and fundraising processes, thereby boosting investor confidence and attracting more venture capital. This aligns with the EU's goals of the 'European Innovation Act.' However, stricter and unified standards may also increase compliance thresholds for early-stage startups, with some operators concerned that 'economies of scale' could force them to relocate to jurisdictions with looser regulatory environments, posing a risk of innovation outflow. Some countries are also worried about their regulatory autonomy being weakened, indicating that policy coordination still needs time. Subsequent timeline and observation focus. After the EU Commission publishes the draft, the Council and European Parliament will begin negotiations, which may extend into 2026. The market will focus on three key issues: first, whether ESMA can secure sufficient funding and manpower to support cross-market enforcement; second, the extent of member states' compromises on regulatory sovereignty; and third, whether startups and investors can truly enjoy lower costs and greater transparency after MiCA is paired with ESMA's expanded powers. As long as the EU can find a balance between efficiency and innovation, the long-term goal of unified regulation will enhance the international competitiveness of the regional financial market and provide a reference for global regulatory reforms. Overall, empowering ESMA with SEC-like authority is a significant step for the EU in improving its capital markets and crypto environment. This reform must balance enhancing efficiency, protecting investors, and maintaining innovation vitality, relying on political coordination and regulatory wisdom from Brussels. The world is closely watching, waiting for the EU to chart a clear course in the next phase of its legislative journey. Related reports: The EU reportedly imposed a €2.95 billion 'antitrust fine' on Google, marking the fourth penalty for the tech giant in nearly a decade. Financial Times: The EU's digital euro is considering using public chains like Ethereum and Solana for operation, moving towards a transparent public ledger. European Central Bank: The digital euro is expected to launch in 2029, provided that relevant legislation is completed by 2026. This article, titled 'EU Plans to Transform ESMA into a European SEC, Unifying Regulation of Crypto and Traditional Markets,' was first published in BlockTempo, a leading blockchain news media.