As the US’ capital markets continue to grow, the EU is aiming to compete by enabling greater supervisory powers for ESMA to work alongside national authorities.
In a bid to compete with the US’ growing capital markets, the European Commission (EC) is seeking to expand oversight over financial markets, such as stock and crypto exchanges.
According to a report from The Financial Times, the EC is reportedly drafting plans to hand over more responsibility to the European Securities and Markets Authority (ESMA) to allow for the creation of an EU “capital markets union”.
ESMA’s new powers would be aimed at reducing fragmentation of financial markets across the continent, as well as providing the infrastructure to welcome more investment for these markets.
European Central Bank (ECB) President Christine Lagarde and her predecessor, Mario Draghi, are reportedly in favour of handing greater oversight to ESMA in a bid to increase EU competitiveness.
The EC will finalise its proposals as part of a wider markets integration package in December 2025.
Is ESMA the answer to the US’ SEC?
ESMA currently oversees the provision of standards related to financial market activity, such as risk analysis, rules around investor protection, and promoting transparent and functioning rules for securities markets.
However, its supervision is limited as it operates a dual system whereby national financial authorities can operate independently for day-to-day enforcement of rules laid out in the Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR), while also able to slightly interpret these rules for market specifications.
With new proposals looking to extend ESMA’s authority, the EU is concerned independent national control of securities markets is leading to high-costs in cross-border trades, which the EC is looking to remedy to help EU startups gain greater exposure to investment.
ESMA is central to the EC’s plans to help curb high costs in cross-border trade stemming from stock exchanges, crypto exchanges and clearing houses, according to people familiar with the matter cited by The Financial Times.
It is believed ESMA will have final clearance over disputes between large asset managers, but will not intervene if disputes arise from national supervisory authorities, which the agency has not been shy in criticising in the past.
ESMA’s dynamic crypto relationship
Crypto exchanges may fall under greater supervision by ESMA, which has been a point of contention for national authorities following a report that questioned the licence application process of some smaller countries.
One national authority within ESMA’s June 2025 report came into question. The agency believed the Malta Financial Services Authority (MFSA) should have been “more thorough and conducted sufficient time” of compliance during its process to hand Markets in Crypto Assets (MiCA) licences.
Other countries that have pushed back on greater supervision of ESMA have been Luxembourg and the Republic of Ireland. They believe their national finance sectors could be hampered as the agency would incentivise greater focus on larger EU nations over smaller countries.
“We would like to have convergence rather than creating a costly and ineffective centralised model,” said Luxembourg’s Finance Minister, Gilles Roth.
If ESMA is to become the EU’s answer to the US Securities and Exchange Commission (SEC), it will have to immediately strike a positive relationship with national authorities and crypto exchanges.
The US SEC, under President Donald Trump’s second term, has fostered crypto growth by introducing ‘crypto-friendly’ regulations that provide transparency, such as the crypto-asset classification and side-by-side crypto trading rules.
