EU finance ministers have agreed to shift supervision of the bloc's largest crypto companies to a central watchdog, in a move designed to close a loophole in the Markets in Crypto-Assets Regulation (MiCA) that allows firms licensed in one member state to serve customers across all 27 EU countries under home-country oversight alone.
The Council of the European Union reached a political agreement on Oct. 9 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, which 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 MiCA's passporting system, a provider authorised in one member state can offer approved services elsewhere in the EU without establishing a physical presence in every country it serves. That arrangement reduces duplication for firms expanding across borders, but it also places considerable responsibility on the national authority issuing the initial approval, since a company's operations, client assets and technology systems can grow well beyond the market where it was licensed.
The consequences emerged in a July 2025 ESMA review of the Malta Financial Services Authority's authorisation of an unnamed crypto provider.
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 centralised supervision, Reuters reported.
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.
Analysis
Why This Matters
- The decision would change how the EU's largest crypto exchanges are supervised, shifting oversight from national regulators to a single European watchdog.
- It addresses a recognised weakness in MiCA's passporting system, where a firm licensed in one member state can serve all 27 EU countries under home-country supervision alone.
- The proposal still faces negotiations with the European Parliament, meaning the final scope of centralised supervision is not yet settled.
Background
MiCA was designed to give crypto firms a single route into the European market. Under its passporting system, a provider authorised in one member state can offer approved services elsewhere in the EU without establishing a physical presence in every country it serves. Critics of the arrangement have argued that national authorities can end up supervising operations, client assets and technology systems that extend far beyond their own markets. A July 2025 ESMA review examined the Malta Financial Services Authority's authorisation of an unnamed crypto provider, highlighting the risks of this model. The new Council agreement is part of a wider package aimed at integrating European financial markets.
Key Perspectives
EU finance ministers: They agreed the compromise on Oct. 9, backing central oversight for the most significant crypto-asset service providers while keeping national supervision for the rest.
European Commission: Its original proposal went further, calling for all crypto service providers to move under ESMA supervision, a plan the Council has narrowed considerably.
National regulators and industry: The compromise would leave the majority of providers under home-country supervision, preserving the passporting benefits of MiCA while adding central oversight only for the largest firms.
Critics/Skeptics: The limited scope means only an estimated 10 to 15 of roughly 360 providers would qualify for centralised supervision, raising questions about whether the reform fully addresses the gaps the review identified.
What to Watch
- Negotiations between the Council and the European Parliament, which will determine the final shape and scope of the oversight regime.
- The criteria used to define which providers count as "most significant" and therefore fall under ESMA supervision.
- Any further ESMA reviews of national authorisations that could influence the pace or breadth of the reform.