EU Council Rejects Direct ESMA Supervision for All Crypto Firms

ESMA supervision of all digital-asset firms was rejected by EU member states, leaving most crypto providers under national regulators instead of the European Securities and Markets Authority. The Council’s agreed position marks a substantial retreat from the European Commission’s original proposal, presented in December 2025, which would have given ESMA direct oversight of every authorised crypto provider.

Under the Council’s stance, national authorities would remain responsible for most firms, with direct EU oversight reserved for businesses whose size and cross-border reach meet a significance test. The relevant thresholds have not yet been published, leaving the exact dividing line unclear.

ESMA supervision and the significance test for market infrastructure

The same significance test would apply to other market infrastructure. The most important cross-border trading venues, central securities depositories and clearing houses would also move from national supervision to ESMA.

Venue operators that do not meet the mandatory criteria could voluntarily apply for Pan-European Market Operator (PEMO) status, allowing them to operate several EU trading venues under a single licence and ESMA supervision. This could give brokers a more consistent process for connecting to and trading across those venues. However, the licence would belong to the market operator, while brokers would still need their own permissions to provide investment services.

The Council also wants to expand the activity permitted under the EU’s DLT Pilot Regime, a regulatory sandbox for trading and settling tokenised financial instruments, giving regulated firms more room to test blockchain-based market infrastructure.

Any transfer of directly supervised firms to ESMA would take place over two years, with joint teams of national and EU supervisors managing the transition.

The agreement currently establishes only the key elements of the Council’s negotiating position. The text must still be finalised and formally adopted, and the European Parliament must agree its own position before institutional negotiations begin. The undisclosed significance thresholds will determine which nationally supervised crypto-asset service providers must prepare for a two-year transfer to ESMA.