Nearly a year after the Markets in Crypto-Assets Regulation (MiCA) came into full force, the debate over who should supervise crypto-asset service providers (CASPs) is intensifying across the EU. France, Italy, and Austria advocate in favour of granting the European Securities and Markets Authority (ESMA) direct oversight of major CASPs. Malta, on the other hand, warned against rushing into centralisation arguing that it could stifle innovation, add unnecessary bureaucracy, and undermine the EU’s attractiveness as a crypto hub and instead called for close cooperation and coordination among national regulators, which is generally viewed as the more effective and pragmatic approach.
Proponents of central oversight suggest that MiCA could be weakened by inconsistent application across Member States creating risks of regulatory arbitrage and weaker investor protection. France, Italy, and Austria propose a framework similar to the Single Supervisory Mechanism for credit institutions claiming it would harmonise supervision, reduce costs, and ensure a level playing field. The suggestion is that firms could exploit differences between jurisdictions potentially undermining MiCA’s passporting benefits.
Malta rightly stresses that any discussions on centralisation are premature. Moving too quickly toward EU-level control risks imposing rigid, one-size-fits-all rules that fail to reflect local realities, slowing innovation, and discouraging market entrants. Enhanced cooperation through ESMA-led initiatives, peer reviews, and coordination among competent authorities provides a more practical way to harmonise supervision while preserving local expertise. This is in effect the approach that has been adopted for decades in the case of MIFID Firms, insurance companies, payment institutions and other financial services operators that have access to the single market of the EEA through the relevant passporting rights.
From a legal perspective, MiCA was designed to harmonise rules without eliminating national oversight. Recital 76 explicitly confirms that CASPs should be authorised and supervised by their home Member State while enjoying EU-wide passporting. EU principles under the Treaty on European Union make centralised supervision justified only if national authorities cannot achieve the objectives and EU action adds measurable value, conditions that clearly do not apply to the case at hand.
CASPs differ fundamentally from systemically important banks. This nascent sector is smaller, highly innovative, and carries risks that are not comparable to the ones posed by credit institutions. National regulators’ proximity to local markets allows for agile supervision that a distant EU authority could never replicate. MiCA was intended to provide legal certainty while preserving national discretion. It is evident that strong, locally informed oversight – not centralisation – remains the most effective path to protect investors and support growth in the EU’s crypto market.