Too Big to Supervise at Home: EU Limits Direct ESMA Rule to Crypto Giants

EU member states have rejected plans to put every digital-asset firm under direct ESMA supervision, drawing a line that leaves most of them under their familiar national watchdogs.

This is a substantial retreat from the European Commission’s original proposal, presented in December 2025, which implied that ESMA would supervise every authorised crypto provider.

The Council instead wants national regulators to remain responsible for most firms, reserving direct EU oversight for businesses whose size and cross-border reach justify it. Where that line will be drawn remains unclear because the relevant thresholds have not yet been published.

One Licence for Multiple Trading Venues

The same significance test would apply to other parts of Europe’s market infrastructure. Under the Council’s agreed position, the most important cross-border trading venues, central securities depositories and clearing houses would also move from national supervision to ESMA.

Venue operators that do not meet the mandatory supervision criteria could instead apply voluntarily for Pan-European Market Operator (PEMO) status to operate several EU trading venues under a single licence and ESMA’s supervision.

This could give brokers a more consistent process for connecting to and trading across those venues. However, the licence would belong to the market operator, while brokers would still need their own permissions to provide investment services.

The Council also wants to expand the amount of activity permitted under the EU’s DLT Pilot Regime, a regulatory sandbox for trading and settling tokenised financial instruments. The change would give regulated firms more room to test blockchain-based market infrastructure.

Changes Are Not Yet in Force

The transfer of directly supervised firms to ESMA would take place over two years, with joint teams of national and EU supervisors managing the transition.

For now, the agreement establishes only the key elements of the Council’s negotiating position. The text must still be finalised and formally adopted, and the European Parliament must agree its own position before institutional negotiations begin.

The undisclosed significance thresholds will determine the dividing line between nationally supervised CASPs and firms that must prepare for a two-year transfer to ESMA.