According to a report by the Financial Times, the European Commission is mulling the idea of creating a single supervisory authority that would have the power to oversee stock exchanges, crypto platforms, and clearing houses. This new independent authority could be likened to the U.S. Securities and Exchange Commission (SEC). The Commission wants to reduce the number of local regulators by centralizing control over Europe’s fragmented financial system.
The proposed structure would enable fintech startups and exchanges to trade not only within one EU member state but throughout the Union without the cumbersome process of dealing with multiple regulators. It is also envisaged that this simplification of the supervision will spur the resumption of the capital markets union; thus, the Commission’s plan to table the legislative proposal comes as a move alongside that overarching objective.
The discussion of issues stemming from the interface of multiple jurisdictions is hinged on the ESMA role expansion, the European Securities and Markets Authority. The idea to bestow on ESMA the power over such cross-border entities, crypto exchanges, stock markets, and clearing houses etc. is discussed as one of the major moves to a centralized EU financial governance in the paper.
According to the report, the plan is supported by both the present President of the European Central Bank, Christine Lagarde, and her predecessor, Mario Draghi. They have been notably advocating for more integration of the European financial market within the bloc in the past. Marking the trend, Lagarde has also been supportive of German demand for the setting up of a single European stock exchange, as can be inferred from recent reports.
A European Commission representative told the Financial Times that the commission is considering “the potential of EU-level supervision” for “critical infrastructures such as central counterparties, central securities depositories, and trading venues, as well as large cross-border asset managers.”
It is an idea that not all EU members have supported. According to the reports, Luxembourg and Dublin — both significant European financial hubs — have voiced their doubts and argued that a single supervisor could diminish the power of smaller countries in influencing the financial policy.
This move is consistent with the recent EU initiatives to centrally oversee the crypto markets, stablecoins, and tokenized real-world assets. In the beginning of this year, EU finance ministers gave their support to a plan for the digital euro, while the Commission is preparing more legislative proposals on asset tokenization for December.
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