France, Italy, and Austria back a broader ESMA role to supervise major crypto firms, arguing centralized oversight would harmonize EU regulation amid concerns about Malta’s licensing gaps and MiCA passporting weaknesses that spur proposals for tighter external activity rules and stronger cybersecurity supervision.

The push for ESMA-led supervision aims to create regulatory consistency across the EU, with proponents saying a single authority could streamline cross-border activities and reduce arbitrage.

Critics warn that expanding ESMA's remit could slow innovation and burden smaller firms, citing regulatory gaps in some member states and Malta's crypto framework as examples.

EU officials say the services market is fragmented even as the goods market remains strong, contributing to less private savings flowing into the real economy and pushing capital toward overseas destinations.

The proposal seeks a more centralized EU regulatory model similar to the U.S., with ongoing debates in the European Parliament and the Council before adoption.

The broader package targets boosting EU wealth creation and competitiveness by strengthening capital markets; EU data shows stock-exchange market capitalization at about 73% of GDP versus 270% in the U.S., underscoring potential gains from stronger regulation.

By creating a more unified framework, the plan aims to close the EU competitiveness gap, attract investment, and better support high-growth sectors like crypto and fintech, given the current market size gaps relative to the U.S.

Contextual data shows EU stock exchange capitalization at 73% of GDP compared with 270% in the U.S., highlighting the competitiveness gap the proposal targets.

Pan-European trading venues could streamline corporate structures and licenses under a single umbrella, with possible relaxation of limits on digital ledger technologies to broaden blockchain-related services.

There is a side note of optimism on Bitcoin price projections from Ripple’s CEO, but it does not drive the regulatory narrative.

The proposal requires approval from the European Parliament and the Council, with negotiations ongoing and broader MiCA revisions under consideration to address cross-border regulatory gaps.

The plan echoes long-standing calls for a European SEC to manage cross-border systemic risks and bridge Europe’s regulatory gap with the U.S., as floated by ECB President Christine Lagarde and echoed in discussions on ESMA-centric supervision.