A new regulatory battle is taking shape across the European Union, this time not over whether to regulate crypto assets, but over who should hold supervisory authority. The European Commission has proposed transferring direct oversight of the bloc’s largest crypto asset service providers to the Paris-based European Securities and Markets Authority, a move that would shift front-line control away from national regulators. The debate is unfolding as the industry continues to adapt to the Markets in Crypto Assets Regulation, which only recently became fully applicable across member states.
France, Austria, and Italy have voiced support for the centralization push. In a joint paper published in September 2025, their market authorities called for a stronger EU-level framework, citing significant differences in how member states authorize firms and warning that inconsistent practices could enable regulatory shopping. They argued that harmonized oversight is necessary to protect investors and preserve the integrity of Europe’s digital asset market.
Malta has taken a different position. The Malta Financial Services Authority told Cointelegraph that introducing structural changes at this stage would be premature, noting that MiCA’s full impact on the market has yet to be assessed. The MFSA said its stance was not about protecting national advantage but about regulatory timing, effectiveness, and maintaining Europe’s appeal to crypto businesses. The dispute carries broader significance because MiCA allows firms authorized in one member state to passport services across the entire EU, making the question of supervision a matter of market integration and investor protection, not just administrative procedure.
Ian Gauci of Maltese law firm GTG, who helped draft Malta’s original crypto regulatory framework, pushed back against characterizations of the debate as a small state resisting the Commission. He told Cointelegraph that Malta’s objections are not jurisdictional but concern the structure of the proposal itself and how it would function across the union. Gauci said he was not opposed to a stronger EU-level role where genuinely warranted, but argued that centralization should target systemic cross-border firms with clearly identified risks rather than serve as a blanket response to uneven supervision.
ESMA already coordinates supervisory convergence work among national authorities, including a fast-track peer review of one of Malta’s crypto firm authorizations, widely reported to involve exchange OKX. The review found that Malta met expectations on supervisory standards but concluded that the firm’s authorization process should have been more thorough. Supporters of centralization point to that episode as evidence that a single supervisor for major cross-border firms would deliver more harmonized oversight and reduce forum shopping, as an ESMA spokesperson told Cointelegraph.
OKX has rejected the suggestion that firms choose smaller jurisdictions to avoid rigorous oversight. The exchange’s European chief executive, Erald Ghoos, said OKX had operated under Malta’s regulatory framework since 2021 and that its MiCA authorization reflected a multi-year supervisory relationship rather than an expedited process. With MiCA still being rolled out, Ghoos argued there is no evidence the current model is failing, and that moving toward centralization at this stage appears to be a political decision rather than one grounded in demonstrated need.
Gauci’s deeper concern is structural fragmentation. He warned that large crypto firms operate as integrated systems, and splitting oversight among ESMA, national authorities, and the Anti-Money Laundering Authority would undermine that unity, particularly given that the Digital Operational Resilience Act requires a consolidated view of technology risk. In a crisis, he argued, fragmented accountability could prove damaging. His preferred approach is to strengthen existing tools, including making peer reviews more consequential, setting clear timelines, and imposing penalties for persistent supervisory failures, rather than restructuring MiCA’s allocation of powers.
At the heart of the debate, Gauci says, is a choice between supervisory depth and scale. Jurisdictions that moved early built genuine expertise and proximity to a fast-moving industry, and dismantling that too quickly risks replacing it with distance. He cautioned that removing the incentive for member states to invest in serious supervisory capacity could ultimately encourage the offshore drift that European policymakers are trying to prevent.
Originally reported by CoinTelegraph.
