The European Central Bank (ECB) has reportedly approved the European Union’s (EU) plan to transfer supervision of major financial markets, including crypto, from national authorities to a centralized supervisory authority.
The ECB gives the green light to the centralization of the supervision of cryptocurrencies
The European Central Bank on Friday backed the EU’s proposal to integrate the bloc’s capital market through a centralized entity, seeking to boost the region’s competitiveness and harmonize regulation, Reuters reported.
The financial regulator has expressed its full support for enhanced EU-level supervision of cross-border systemically important financial market participants, including major trading platforms, central counterparties, central securities depositories and crypto asset service providers (CASPs).
“The ECB fully supports the Commission’s proposals, which constitute an ambitious step towards deeper integration of capital markets and financial market supervision within the Union,” it said in an opinion. It should be noted that the opinion is required by the Commission’s legislative process, but is not binding on legislators.
The plan, led by France and Germany, was initially suggested during the development of the Markets in Crypto-Asset (MiCA) regulation. It proposes transferring the power to license new businesses and supervise all crypto asset service providers to the bloc’s markets watchdog, the European Securities and Markets Authority (ESMA).
In October, ESMA President Verena Ross revealed that the EU executive was formulating regulations to grant greater authority to the regional regulator and promote a “more integrated and globally competitive” capital market in Europe.
She argued that regulating at national level requires considerable effort to develop 27 times new specific resources and expertise within different national supervisors, which “could have been done more effectively once at European level”.
Friday’s ECB notice noted that ESMA will need adequate resources and staff to meet its increased responsibilities. Furthermore, it suggests a gradual transition from national to EU-level supervision to minimize disruption.
Now the Commission’s proposal will be negotiated between EU governments and the European Parliament, with discussions expected to last several months before the law is finalized.
EU proposal could undermine MiCA’s credibility
Despite the ECB’s support, some EU countries and crypto industry players have opposed the EU proposal, arguing that it could undermine efforts by national watchdogs and companies in recent years to regulate the sector and implement the bloc’s overall framework for crypto assets.
Smaller EU countries including Luxembourg, Ireland and Malta have expressed concerns over the proposal and ESMA’s ability to supervise the crypto market, arguing it could weaken their financial sectors.
Last year, ESMA notably questioned Malta’s approval process for pan-European licenses for crypto companies, saying the national regulator had “only partially met expectations”, despite having adequate staff and technical infrastructure.
As Bitcoinist reported, Robert Kopitsch, Blockchain’s general secretary for Europe, said in November that reopening MiCA at this stage could introduce legal uncertainties, potentially delaying the authorization process and diverting attention and resources from the practical task of consistent implementation.
Kopitsch believes that a move towards a more centralized supervision model should occur based on “concrete experience and evidence collected during the first years of MiCA implementation”. He also pointed out that local regulators have had more direct and frequent interactions with companies.
Andrew Whitworth, founder of Global Policy Ltd., confirmed that the transfer of oversight would require additional resources to manage the current workload of local regulators. He acknowledged that this change may prove difficult at the moment, given the current state of implementation and the need to adjust targets.
Judith Arnal, associate senior researcher at the European Center for Credit Research (ECRI) and board member of the Bank of Spain, also said that recent attempts to change the bloc’s crypto rules, particularly in the stablecoin sector, risk “undermining the credibility of MiCA as a coherent and globally influential regulatory framework.”
The total crypto market capitalization is at $2.43 trillion in the one-week chart. Source. TOTAL on TradingView
Featured image from Unsplash.com, chart from TradingView.com
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