The EU will present plans today for a financial "super-regulator", part of a bid to revolutionise oversight across the bloc in the hope of gaining strategic autonomy from the US.
According to a preliminary version of the proposal seen by AFP, the existing EU watchdog would see its supervisory powers strengthened over those of national regulators.
The European Securities and Markets Authority (ESMA) would oversee cryptocurrencies, stock exchanges and asset managers across the 27-nation bloc.
It marks a first step towards the creation of a unified capital market to help Europe's flagging economies better compete against faster-growing ones in the US and Asia.
However, some countries oppose transferring full control to the Paris-based institution.
It is a sensitive subject at a time when Bitcoin has plunged by 30% in two months and fears of a tech bubble are growing.
Brussels is considering transferring to ESMA the supervision and licensing of service providers related to crypto assets.
The role has been handled by national authorities under a European Union-wide cryptocurrency regulation launched late last year. But some countries have been accused of being too lenient.
ESMA in July criticised lax oversight in Malta, which has attracted a number of cryptocurrencies and investors.
The plans are "not purely technical, but they are also politically driven", Kenneth Farrugia, CEO of Malta's MFSA regulator, told AFP.
According to Farrugia, the ESMA also lacks the resources to carry out broader regulation across Europe.
Giovanni Cunti, head of the Gate crypto platform licensed by the Maltese regulator, perceived "a potential danger" for the sector and feared that in the new system he would not have the contacts to speak to when needed.
SEC-style regulator
The EU's plans would grant the European watchdog direct supervisory power over financial infrastructure, not unlike the SEC, the powerful US market regulator.
This includes stock exchanges, asset managers, the clearing houses that act as intermediaries in financial transactions and the central depositories that record them.
The European watchdog would be granted a new independent executive body with enhanced powers, capable of suspending European permits for funds in cases of misconduct.
Banks are among the few financial entities to remain beyond its purview and would still fall under the European Central Bank and European Banking Authority.
Unified supervision is widely seen as a stepping stone to a "capital markets union", with which the European Commission aims to "effectively connect savings with investment needs".
Mario Draghi, the former head of the European Central Bank, published a report last year with a series of proposals to kickstart the EU economy, including annual investment of at least €750-800 billion.
According to Draghi, there is a lot of untapped money in the European economy: 70% of savings in European households sit idle in bank accounts and are not being channelled efficiently into productive investment.
"A national body is incentivised to make decisions aligned with the local market's interests. A European body would help create this common market," Nicolas Veron, an economist at European think tank Bruegel, told AFP.
While France has long pushed for this project, Luxembourg - Europe's leading asset management hub - is keen to maintain national regulation tailored to local demands.
ESMA lacks "knowledge on the specifics of each market" and resources, unlike national regulators, said Serge Weyland, head of the Association of the Luxembourg Fund Industry.
Other member states reject centralisation, viewing it as a loss of influence to Paris.
Germany, seeking to protect Frankfurt's leading position in the financial world, supports "strengthening convergence" but insists it must "add value", its finance ministry told AFP.
