EU Plan Would Give Central Watchdog Power Over Largest Crypto Exchanges

EU ministers agree to central oversight for biggest crypto firms

EU finance ministers have reached a political agreement to place the largest crypto exchanges under direct supervision by a central European watchdog. The proposal targets a loophole in the bloc's crypto rules that currently lets a single national license allow a firm to serve customers across all 27 EU countries.

The Council of the European Union announced the agreement on October 9 as part of a wider package to integrate European financial markets. The plan would shift oversight of major crypto-asset service providers from national regulators to the European Securities and Markets Authority, or ESMA.

Key details of the proposal

• Only an estimated 10 to 15 of roughly 360 crypto providers would qualify for direct ESMA supervision, according to Reuters reporting.
• ESMA would oversee providers with at least 15 million active EU users, or those meeting three of five significance criteria.
• Criteria include more than 1 million active users, over €1 billion in crypto assets held on behalf of clients, and more than €4 billion in annual client transactions.
• ESMA would gain powers to request information, conduct inspections, investigate breaches, and impose financial penalties on directly supervised firms.
• The agreement is narrower than the European Commission's original plan, which sought to move all crypto service providers under central oversight.

What the Council draft says

Under the Council's draft text, a provider's overall scale and connections to the financial system — rather than just where it is incorporated — would determine whether supervision moves to ESMA. The agency would handle both ongoing oversight and enforcement for the largest firms.

What triggered the push for change

The proposal follows concerns about inconsistent national licensing standards. A July 2025 ESMA review of the Malta Financial Services Authority's authorization of an unnamed crypto provider raised alarms. ESMA questioned why the company received approval while material issues remained unresolved, including gaps in governance, potential conflicts of interest, technology infrastructure, custody arrangements, and anti-money-laundering risks.

Malta subsequently said it was implementing ESMA's recommendations but opposed transferring supervision to the central watchdog. In September 2025, Malta argued that MiCA was still too new to justify an additional regulatory layer and warned that centralization could introduce bureaucracy and harm competitiveness. The dispute highlighted a broader tension: one national regulator's licensing decision can affect crypto customers across Europe, even when other watchdogs view the required level of scrutiny differently.

What is confirmed

EU finance ministers reached a political agreement on October 9. The Council has set its negotiating position. An estimated 10 to 15 of roughly 360 providers would face centralized oversight. A July 2025 ESMA review found gaps in Malta's authorization process for one crypto provider. Malta implemented recommendations but opposed centralization.

What is still unclear

The final outcome of negotiations between the Council and the European Parliament has not been determined. It is unconfirmed how many providers will ultimately meet the significance thresholds. The timeline for final adoption of the revised rules remains open.

Why this matters for crypto firms

Under the current MiCA passporting system, a crypto firm authorized in one member state can offer services across the entire EU without setting up a physical presence in every country. This reduces duplication for expanding firms but places considerable responsibility on the national authority that issues the initial approval. The proposed changes aim to ensure that the largest and most systemically connected providers face a consistent supervisory standard across the bloc.

Next steps

The Council's agreement sets its negotiating position but does not change the law immediately. The Council must now negotiate the proposal with the European Parliament before any revised rules take effect.

Sources

• CryptoSlate