The European Commission is taking a bold step toward reshaping the region’s financial oversight. According to the Financial Times, the EU plans to present a “market integration package” in December 2025 that would establish a single financial regulator — a European version of the U.S. Securities and Exchange Commission (SEC) — responsible for supervising both traditional stock markets and cryptocurrency trading platforms.
Currently, Europe’s financial supervision system is fragmented, with dozens of national regulators and hundreds of trading and post-trading platforms. This decentralized model increases the cost of cross-border transactions and slows down innovation among startups. The proposed reform aims to unify oversight under the European Securities and Markets Authority (ESMA), enhancing competitiveness and efficiency across the EU.
Several key EU member states, including France, Italy, and Germany, support the move toward centralization. However, Luxembourg and Ireland have expressed strong opposition, fearing that transferring power to ESMA could weaken their national financial centers. Luxembourg’s Finance Minister Gilles Roth emphasized that his country supports “harmonization of supervisory practices” but opposes the creation of a “costly and inefficient centralized model.”
If approved, ESMA would gain significant authority over stock exchanges, crypto service providers, central counterparties (CCPs), and central securities depositories (CSDs). It would also be empowered to resolve disputes between major asset management firms and national regulators, acting as the final arbiter in high-level regulatory conflicts.
The European Central Bank’s President, Christine Lagarde, and former Italian Prime Minister Mario Draghi have long argued for deeper integration through a Capital Markets Union, which this initiative directly supports. The reform is seen as a crucial step in ensuring that Europe remains competitive with the United States in capital markets and digital finance.
Still, not all parties are convinced. European exchanges warn that expanding ESMA’s powers could lead to higher compliance costs and increased fees for the industry. Marin Capelle, policy advisor at the European Fund and Asset Management Association (EFAMA), stated that more regulatory oversight means “higher industry levies,” potentially burdening smaller firms.
Interestingly, Germany, which had previously resisted such centralization, is now showing signs of compromise. The Merkel administration (now under Chancellor Friedrich Merz) appears open to transferring partial control over the asset management sector to ESMA while maintaining national oversight of crypto exchanges. Meanwhile, the Bank of France has urged EU authorities to grant ESMA direct control over major crypto companies to ensure uniform regulation and stability across the bloc.
As the boundaries between traditional finance and digital assets continue to blur, EU regulators are racing to adapt. Natasha Cazenave, Executive Director of ESMA, warned earlier this year that the growing interconnection between crypto and traditional finance poses systemic risks that require stronger, unified supervision.
In conclusion, the European Commission’s proposal signals a historic shift in financial governance. By creating a centralized supervisory body akin to the U.S. SEC, the EU seeks to enhance market transparency, reduce fragmentation, and strengthen investor confidence. However, success will depend on balancing national interests, ensuring efficient regulation, and preventing the rise of excessive bureaucracy that could stifle innovation.
