AuguryEU push to turn its markets watchdog into a ‘European SEC’ raises alarms for crypto licensing
This article was written by the Augury Times
New plan lands, and crypto firms worry about a licence bottleneck
Brussels has quietly opened a debate about turning the EU’s markets supervisor into something closer to a US-style regulator. The immediate effect is not a new law yet — it is a political idea with teeth. But for crypto firms and fintechs that sell services across Europe, the proposal has already set off alarms about slower, tougher licensing and bigger compliance costs.
The reason is practical. If the European Securities and Markets Authority (ESMA) were given powers to decide licences and directly police firms, companies that once relied on national approvals and simple passporting across borders could face another layer of sign-off. That threatens fast-moving businesses that rely on speed and scale to grow.
What the proposed shift would actually change
At its core, the proposal would give a single EU-level body clearer control over market rules and the power to supervise firms directly in key areas. Today ESMA mainly coordinates national regulators, issues guidance and enforces common standards. Under the new idea, it could become the primary supervisor for certain markets and firms, with authority to grant or refuse licences and to set binding conditions.
That is a big structural change. Instead of member-state regulators approving a crypto-asset service provider or a payments firm and allowing it to operate across the bloc via passporting, a stronger EU regulator could demand a second licence or an EU-wide authorisation. It would also have teeth to carry out on-site checks, impose fines directly, and make binding cross-border decisions without waiting for each capital’s sign-off.
Advocates say the change would reduce fragmentation, create clearer single rules and help large institutions that want consistent oversight. Skeptics point out that giving one agency broad powers risks concentrating discretion, increasing delays and producing a one-size-fits-none rule set.
Why legal experts say licences could become harder to get
Lawyers following the files see several concrete frictions that would make life harder for crypto and fintech licences.
First, a centralised authorisation process can be slower. If ESMA or a similar EU body must vet each licence application for compliance with new EU standards, approvals that once took weeks could stretch into months. That matters for startups that launch products in multiple markets on short timetables.
Second, the quality bar may rise. A new regulator may insist on tougher capital rules, stricter custody obligations, more detailed governance checks and stronger anti-money-laundering controls. These are not abstract — they mean firms must hold more capital, restructure how they store customer assets and expand compliance teams, which raise fixed costs.
Third, passporting could become more conditional. National regulators now approve a firm and that licence is respected across the EU. An EU supervisor that reserves the right to re-check or veto passported activities could create legal uncertainty. Firms would face the risk that an approval in one country does not guarantee smooth access everywhere.
Practical examples show the strain. A crypto custodian expanding from one member state into ten could be required to show separate custody safeguards for each market, or to obtain an explicit EU-level custody licence. A fintech using a payment rail tied to local banks might see its licence conditioned on country-by-country assessments of the bank partners’ AML controls.
What this could mean for markets, investors and funding
In the near term the market reaction is likely to be simple: more uncertainty equals more volatility. Listed crypto-adjacent firms and fintechs with big EU exposure could see their shares wobble as investors price in licensing risk, higher costs and slower growth.
For venture and growth capital, the risk is a funding chill. If getting to scale in Europe looks slower or more costly, investors will demand bigger discounts or push startups to locate in friendlier jurisdictions. That could hasten consolidation: established players with deep pockets and mature compliance teams would gain a relative edge, while smaller challengers could struggle to survive.
Cross-border activity could shift too. Companies may route new services through non-EU hubs with lighter gatekeeping, or they may design products that avoid regulated touchpoints. Those moves reduce the EU’s chance to shape market standards and could fragment the global marketplace.
On the flip side, large financial groups and established custodians could benefit. Clear, binding EU rules and a single supervisor may cut long-term legal uncertainty for big institutions that can absorb higher compliance costs. For institutional investors seeking safety and standardisation, that could be a net positive.
How fast this could move through Brussels — and where it might stall
A structural change like this must pass political tests. The Commission can float proposals, but the Council of member states and the European Parliament must agree. Expect long debates about sovereignty, the scale of ESMA’s powers and the fine print of supervisory remit.
Member states with strong national regulators could push back. Smaller capitals may fear losing influence and jobs if supervision centralises. The timetable depends on political will: a fast track could move rules within two years, but a full overhaul with new supervisory powers and resources could easily stretch to three or four years or more.
In short, this is not an overnight shock. But the uncertainty created by the debate is real and immediate, and market participants are treating it as a material policy risk.
Practical steps for investors and firms to weather tougher EU oversight
Investors should treat the proposal as a governance and regulatory risk that can affect growth and margins. Re-weight exposure toward companies with proven compliance programs and established EU footprints. Expect a premium for firms that already meet high custody and AML standards.
For firms, the checklist is simple: shore up governance, document compliance frameworks and stress-test expansion plans against longer approval timelines and higher capital needs. Engage with regulators early and push for clarity on how passporting and transitional arrangements would work.
Overall, the move toward a stronger EU regulator is a double-edged sword: it could deliver clearer rules and safer markets in the long run, but it will likely raise costs and slow expansion in the near term. That makes the policy a key risk to price into investments and business plans today.
Photo: Thought Catalog / Pexels
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