EU finance ministers agreed on October 9 to shift oversight of major crypto companies to a central watchdog, reshaping supervision under the Markets in Crypto-Assets Regulation (MiCA). The Council of the European Union reached a political agreement to give the European Securities and Markets Authority (ESMA) direct responsibility for the bloc's most significant crypto-asset service providers as part of a wider package to integrate European financial markets.
The proposed overhaul addresses a weakness in MiCA that allows firms licensed in one member state to serve customers across the 27-country bloc while remaining primarily supervised by their home-country regulator. Under the current system, a provider authorized in one member state can offer approved services elsewhere in the European Union without establishing a physical presence in every country it serves.
Scope of New Supervision
The compromise is considerably narrower than the European Commission's original plan to move all crypto service providers under ESMA. Officials estimate that only 10 to 15 of roughly 360 providers would qualify for centralized supervision.
Under the Council's draft framework, ESMA would take direct oversight of crypto providers with at least 15 million active EU users or those meeting three of five additional significance criteria. These criteria include more than 1 million active users, over €1 billion in crypto assets under custody, and more than €4 billion in annual client transactions.
Regulatory Powers and Implementation
ESMA would gain powers to request information from directly supervised firms, conduct inspections, investigate breaches, and impose financial penalties. The agency would also have authority to restrict services or withdraw authorization where firms do not meet regulatory requirements.
Most crypto service providers would remain under national regulators. ESMA would use guidelines, peer reviews, coordinated investigations, and certain intervention powers to address uneven enforcement across jurisdictions.
The Council envisages a two-year transition period in which joint teams transfer information, operational responsibilities and expertise to ESMA. Existing MiCA licenses for companies brought under direct supervision would remain valid, avoiding the automatic need to seek new authorization.
The agreement sets the Council's negotiating position rather than changing the law immediately. The Council must still negotiate the proposal with the European Parliament to finalize the framework before implementation can begin.
