The European Commission has proposed granting ESMA direct supervisory powers over crypto-asset service providers across the EU, effectively establishing a centralized licensing system for the cryptocurrency market.
The proposal aims to reduce market fragmentation, yet raises concerns over potential delays in licensing, potentially impacting startups and stifling innovation.
The European Commission has proposed authorizing the European Securities and Markets Authority (ESMA) with direct supervision over crypto markets. This shift aims to unify the licensing process currently handled by national regulators, centralizing authority within the EU.
Concerns arise over potential bureaucratic delays and reduced responsiveness in licensing due to ESMA's centralization. Stakeholder comments indicate potential negative effects on startups, potentially favoring larger firms over smaller fintech innovations.
Licensing Centralization Sparks Industry Concerns
Concerns arise over potential bureaucratic delays and reduced responsiveness in licensing due to ESMA's centralization. Stakeholder comments indicate potential negative effects on startups, potentially favoring larger firms over smaller fintech innovations.
The centralized framework could increase market consolidation as financial institutions seek clearer regulation. TRM Labs highlights this shift, anticipating stricter compliance and entry barriers for market newcomers. Such trends highlight a focus on consistent regulatory frameworks.
Faustine Fleuret, Public Affairs Lead, Morpho, “Concentrating both powers in ESMA risks bureaucratic delays and less responsiveness to local innovation ecosystems.”
Lessons from MiCA and Global Centralization Efforts
This mirrors previous centralization efforts, such as MiCA implementation. Comparable initiatives include Swiss and Brazilian authorization regimes, showing increased control over market entries. These efforts often favor well-capitalized entities over smaller operators.
Expert analysis from Kanalcoin suggests more regulatory clarity will boost institutional integration. However, there are concerns about potential innovation slowdowns in the crypto and fintech space, given centralized control can create entry hurdles.
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