Europe’s Push for a Capital Markets Union
According to a report from the Financial Times, the initiative is part of the EU’s long-standing goal to establish a “Capital Markets Union” - a unified financial space that allows startups and institutions to scale across borders without needing multiple national licenses.
The proposal aims to streamline oversight by centralizing power under a single regulator, removing the current maze of fragmented rules across member states. The European Securities and Markets Authority (ESMA) could see its mandate expanded to supervise cross-border entities, including crypto exchanges, stock exchanges, and post-trade infrastructure such as clearing houses.
However, the report also notes that such a proposal is “contentious,” with Luxembourg and Dublin opposing the plan - fearing that a centralized authority could sideline smaller member states’ influence over their domestic finance sectors.
Lagarde Backs Unified Supervision
The proposed changes have received support from European Central Bank (ECB) President Christine Lagarde, who has long advocated for stronger centralization in financial supervision.
Lagarde, together with former ECB President Mario Draghi, supports the idea of a single European stock exchange - a concept that would align with the broader digital finance agenda currently being rolled out.
The European Commission also told FT that it is “still exploring the potential of EU-level supervision” over critical financial infrastructures, including central counterparties, securities depositories, and trading venues, especially those managing cross-border flows of digital assets.
Crypto Firms Could Fall Under Central EU Oversight
The upcoming proposal could extend beyond traditional finance to encompass crypto markets, which have so far been regulated under the Markets in Crypto-Assets (MiCA) framework.
The Commission and EU finance ministers have been actively exploring the next phase of crypto oversight, from stablecoins and tokenization to exchange supervision.
If approved, large crypto entities operating across multiple EU jurisdictions could fall directly under the expanded ESMA mandate, reducing the need for separate national licenses.
The proposal could also complement the EU’s recently approved digital euro roadmap, which is set to move into the design phase in 2025.
Smaller Nations Push Back
Despite strong support from major EU economies like Germany and France, smaller financial centers - particularly Luxembourg and Ireland - are skeptical.
Both countries, which host numerous asset managers and fintech hubs, fear that centralizing power in Brussels or Paris could undermine their competitive edge and stifle local innovation.
Next Steps: Legislative Process Begins in 2026
If the Commission finalizes its proposal in December, it will kick off the ordinary EU legislative process involving the European Parliament and Council, followed by amendments and trilogue negotiations that could stretch well into 2026.
The reform package is expected to coincide with other upcoming initiatives - including tokenization frameworks for real-world assets and a finalized digital euro proposal.
By consolidating supervision, the EU hopes to bolster financial resilience, improve cross-border efficiency, and maintain competitiveness against the U.S. and Asia in both traditional and digital finance.
