The European Commission's Market Integration Package, published in December 2025, proposes transferring direct supervisory authority over all crypto-asset service providers (CASPs) from 27 national regulators to the Paris-based European Securities and Markets Authority (ESMA). The plan has split ...
"We believe that centralisation at this stage would only introduce an additional layer of bureaucracy, which could hinder efficiency during a period when the EU is actively striving to enhance its competitiveness." — Malta Financial Services Authority (MFSA), official statement on ESMA supervisory proposal
The European Commission's Market Integration Package, published in December 2025, proposes transferring direct supervisory authority over all crypto-asset service providers (CASPs) from 27 national regulators to the Paris-based European Securities and Markets Authority (ESMA). The plan has split the bloc into two camps: France, Italy, and Austria want centralized enforcement of the Markets in Crypto-Assets Regulation (MiCA); Malta, Luxembourg, and Ireland are fighting to retain national oversight of firms they licensed. A vote could advance as early as summer 2026, coinciding with the July 1 expiration of MiCA's grandfathering period for existing CASPs.
The stakes are concrete. Malta's MFSA has licensed at least five major exchanges — Crypto.com, OKX, Gemini, Bitpanda, and ZBX — under MiCA, all of which passport their licenses across the EU's 27 member states. If ESMA assumes direct supervisory authority, Malta loses oversight of those firms and, with it, the regulatory franchise the country has built since 2018. The dispute is not abstract. It is a fight over where the EU's $30.5 billion projected crypto market will be governed, by whom, and under what standards.
The Market Integration Package (MIP), proposed by the European Commission in December 2025, is the most significant structural overhaul of EU financial market supervision since MiFID II. It touches approximately 18 existing legislative instruments and would centralize enforcement under ESMA in several targeted areas.
For crypto, the transfer is comprehensive. ESMA would assume direct authorization, monitoring, and supervisory powers over all CASPs where crypto-asset services constitute the firm's primary activity. Credit institutions offering crypto services as a secondary function would remain under existing banking supervision. The package also extends to significant trading venues, central counterparties (CCPs), and central securities depositories (CSDs).
A new Pan-European Market Operator (PEMO) status would allow firms to operate multiple trading venues across member states under a single license, supervised by ESMA rather than national authorities.
EU Commissioner for Financial Services Maria Luis Albuquerque has publicly backed the initiative. ESMA Chair Verena Ross framed the rationale in a February 2026 speech: "Specific new resources had to be built up 27 times, once in each member state, which could have been done more efficiently at a European level."
The proposal requires approval from both the European Parliament and the European Council. Trilogue negotiations are expected throughout 2026, with implementation projected for 2027–2029 following a 12-to-24-month transitional period.
France has been the loudest advocate for ESMA centralization. The Autorité des marchés financiers (AMF) has repeatedly argued that inconsistent national licensing undermines MiCA's credibility. AMF President Marie-Anne Barbat-Layani told Reuters that crypto platforms were "doing their regulatory shopping all over Europe, trying to find a weak link that will give them a license with fewer requirements than the others."
France has gone further than rhetoric. The AMF has signaled willingness to challenge passporting rights of firms licensed in other EU countries if it deems standards insufficient — a threat that, if executed, would undermine a foundational principle of the EU single market.
Italy and Austria's securities regulators joined France in formally requesting ESMA centralization. Their position hardened after ESMA's July 2025 peer review flagged concerns about Malta's authorization process. The argument is structural: if all 27 member states enforce the same MiCA rulebook differently, the regulatory framework lacks coherence.
The Bank of France has separately pushed for Paris-based ESMA to assume direct crypto oversight, citing proximity advantages — ESMA is headquartered in Paris — though critics note this framing reveals a national interest embedded in the "European" centralization proposal.
Malta, Luxembourg, and Ireland have formed an informal bloc against the centralization push. All three have built financial services sectors that depend on their ability to attract and regulate firms locally. Centralization under ESMA would strip these smaller member states of competitive advantages they have spent years constructing.
Malta's opposition is the most vocal and the most consequential. The MFSA has characterized the proposal as bureaucratic overreach. MFSA CEO Kenneth Farrugia has argued that the ESMA peer review process should demonstrate confidence in Malta's expertise, not serve as a pretext for centralization.
Luxembourg's financial regulator head, Claude Marx, warned that centralizing powers at ESMA could create a regulatory "monster" and an "extremely complex" organization. Luxembourg Finance Minister Gilles Roth stated his country prefers "supervisory convergence rather than creating a costly and ineffective centralized model."
The opposition's core argument: MiCA is less than two years into full enforcement. Stripping national regulators of authority before the framework has been tested undermines the system it was designed to create. Malta earned the "Blockchain Island" designation in 2018 when it passed the Virtual Financial Assets Act, giving the MFSA years of hands-on crypto licensing experience before MiCA existed.
In July 2025, ESMA conducted a fast-track peer review of a CASP authorization in Malta. The review found that the MFSA "partially" met expectations in certain areas. The core criticism: material issues related to governance, ICT infrastructure, and anti-money-laundering (AML) protocols remained unresolved at the time the license was granted. ESMA recommended that these gaps should have been addressed during the pre-authorization phase, not deferred to post-licensing supervision.
The review flagged that aspects of the applicant's business plan — including its expansion model and new client listings — were not adequately inspected. Conflicts of interest, governance structures, and technology risks tied to custody and Web3 integrations were cited as insufficiently assessed.
The MFSA responded that no license was at risk of revocation and that ESMA's own report acknowledged the authority's deep expertise and sufficient staffing. According to the MFSA, the entity in question was the first CASP authorized under full MiCA rules anywhere in the EU, meaning there was no precedent for the process.
France's AMF used the peer review as ammunition, with officials characterizing Malta's rapid licensing as a "fast-food" approach to regulation. Whether the criticism is fair or strategic is debatable; what is factual is that the peer review became a political tool in the centralization debate.
As of March 2026, the MiCA authorization landscape across the EU:
The licensing data reveals a structural incentive problem. Smaller member states that move faster on licensing attract firms, generate regulatory fees, and build local expertise. Larger member states that apply stricter standards lose firms to more accommodating jurisdictions — then argue for centralization to eliminate the competitive gap.
The centralization debate maps directly onto the question of who captures the economic value of crypto regulation. Under the current national-supervision model, value flows to:
National regulators: Licensing fees, ongoing supervisory fees, staffing and infrastructure buildout. Malta's MFSA has invested years of institutional capacity in crypto-specific supervision.
Local economies: Regulated firms establish physical presence in licensing jurisdictions, generating employment, tax revenue, and ancillary services (legal, compliance, accounting).
Licensed firms: Passporting allows a single MiCA license to grant access to 450 million EU consumers across 27 member states. The cost of licensing in Malta versus Frankfurt or Paris is a material line item for crypto firms operating on compressed margins during a bear market.
Under ESMA centralization, these value flows would redirect:
ESMA (Paris): The agency would require significant staff expansion, funded by supervisory fees charged to CASPs. The value currently distributed across 27 national regulators consolidates into a single entity.
Large member states: France and Germany, which host the most sophisticated financial regulatory infrastructure, are better positioned to influence an ESMA-centric model.
Compliance costs: Industry groups have warned that centralized approval processes could be slower than national ones, increasing time-to-market for new entrants and potentially consolidating the market around larger, well-capitalized firms.
This is fundamentally a redistribution of regulatory rents. The question is whether the efficiency gains from centralized supervision outweigh the competitive dynamics that MiCA's passporting system was designed to foster.
The most immediate risk to the EU crypto market is not centralization itself — it is the threat to passporting. France's AMF has signaled willingness to challenge licenses issued by other member states, a position that, if formalized, could fragment the single market for digital assets.
Under MiCA, a CASP licensed in any member state can offer services across the entire EU. This is the framework's core value proposition: a single rulebook, a single license, pan-European access. If individual member states begin challenging each other's licensing decisions, the single market fractures — regardless of whether ESMA eventually assumes centralized authority.
The irony is that the push for centralization is motivated by concerns about regulatory fragmentation, but the tactics used to advance it — particularly France's passporting threats — risk creating precisely the fragmentation they seek to prevent.
Key dates:
The timeline creates a collision. The July 1 grandfathering deadline will force hundreds of crypto firms to either obtain national MiCA licenses or exit the EU market. Simultaneously, the centralization proposal could render those newly obtained national licenses subject to future transfer to ESMA. This regulatory uncertainty is a cost borne by the industry and, ultimately, by users.
The EU is attempting to do two things simultaneously: enforce a harmonized regulatory framework (MiCA) through 27 different national regulators while debating whether to collapse those 27 supervisory bodies into one. The contradiction is structural. MiCA was designed to create a single rulebook administered locally; the Market Integration Package proposes to centralize the administration. Whether that improves enforcement or simply relocates regulatory capture from national capitals to Paris is an open question.
What is not debatable: the dispute introduces material uncertainty for every crypto firm operating in or seeking to enter the European market. The July 2026 grandfathering deadline forces licensing decisions under a regime whose supervisory architecture may change within 12 to 24 months. Firms licensing in Malta today cannot be certain that Malta will remain their supervisor. Firms avoiding Malta in favor of stricter jurisdictions may find they paid a higher compliance cost for no competitive benefit if ESMA eventually levels the playing field.
The economic value at stake is not trivial. Europe's crypto market is projected at $30.5 billion in 2026. The question of whether that market is supervised from Valletta, Frankfurt, Paris, or a single European authority determines where regulatory fees flow, which legal systems apply, and how quickly firms can access the EU's 450 million consumers. These are not abstract governance questions. They are economic ones, with concrete winners and losers.