EU Council Deal Narrows ESMA's Direct Reach Over Crypto Firms to a Handful of Giants

EU finance ministers reached a political agreement on October 9 on the market integration and supervision package, known as MISP, setting out a narrower role for the European Securities and Markets Authority than had been floated earlier in the process. Under the deal struck in the Council of the EU, ESMA would take direct supervisory responsibility for only 10 to 15 of the roughly 360 crypto asset service providers currently operating across the bloc.

The figure, attributed to European officials and reported by Reuters, marks a significant scaling-back of ambitions to centralise crypto oversight at EU level. The vast majority of registered providers would continue to be supervised by national authorities, with ESMA's direct remit confined to the largest or most systemically relevant firms.

The Council's text foresees a two-year transition period for supervisory functions to pass to ESMA where applicable, giving both the authority and affected firms time to adjust to the new arrangement. The package also proposes creating a permanent executive body within ESMA, composed of a chair and five full-time independent members, intended to give the authority a more consolidated internal structure for exercising its expanded, if narrower, powers.

National carve-outs

The agreement reflects pushback from member states keen to preserve domestic control over key market infrastructure. Germany defended keeping Deutsche Börse under national supervision rather than folding it into ESMA's direct purview. Spain secured a similar outcome for BME and Iberclear, which are excluded from the transfer of oversight that had initially been envisaged for infrastructures linked to those entities.

These exemptions illustrate the broader tension running through the MISP negotiations: a push toward a more integrated EU capital markets supervisory framework set against member states' reluctance to cede authority over institutions they regard as nationally significant.

Separate from MiCA, tied to tokenization

The MISP package is distinct from MiCA, the EU's regulatory framework for crypto-asset markets, though the two are closely linked in practice since MiCA licensing determines which firms fall within scope of supervision. The Council's agreement also proposes an expansion of the DLT Pilot Regime, the EU's experimental framework allowing market infrastructures to test distributed ledger technology for trading and settlement of tokenized financial instruments.

With the Council's position now settled, the file moves to the European Parliament, which must define its own stance before trilogue negotiations between the two institutions and the European Commission can begin on the final shape of the supervisory package.