SUMMARY OF EU CAPITAL MARKETS UNION (CMU) DRAFT PACKAGE AND INDUSTRY CONCERNS

By Fiorentina D'Amore, CEO Malta – Senior Director of Business Operations Europe, Blockchain.com

PREAMBLE

The industry’s argument against centralizing the supervision of Crypto-Asset Service Providers (CASPs) — "significant" and “non-significant ones” — to the European Securities and Markets Authority (ESMA) and away from National Competent Authorities (NCAs) is rooted in concerns over stifling innovation, adding bureaucracy, and sacrificing local expertise and rapport.

Centralizing MiCA supervision under ESMA, rather than retaining oversight by National Competent Authorities (NCAs), will stifle innovation and undermine local market expertise in the EU. A distant regulator risks adopting a rigid, "one-size-fits-all" approach, which is too slow and bureaucratic for the fast-paced crypto industry, consequently raising barriers to new entries and discouraging startups and innovation. Furthermore, this centralization erodes the specialized supervisory knowledge built up by NCAs in FinTech-forward jurisdictions (like Malta) and fundamentally challenges the principle of subsidiarity embedded in MiCA’s original design, which relied on national oversight coupled with passporting.

We stress that pushing for centralization is premature and futile as the effectiveness of the current, decentralized MiCA system has not been fully assessed, suggesting that supervisory convergence should be the priority, not creating unnecessary bureaucracy and costs.

Important yet basic questions arise:

• If ESMA now monitors NCAs to protect investors, which body will then monitor ESMA?

  
  

• How is ESMA going to find crypto expert employees in France to monitor >1200 CASPS in the EU?

  
  

• How will proportionality be calculated if a one-size-fits-all approach is taken?

Industry operators in Malta have taken a strong, clear public position against the centralizing push led by countries like France and Italy. The logic stems from the following considerations:

• PREMATURE ASSESSMENT: We argue that the move is premature. MiCA has only recently become fully applicable, and it is too soon to assess its full impact or determine if national regulators are actually "failing" to enforce it.

  
  

• RISK TO INNOVATION AND COMPETITIVENESS: Centralization risks imposing a rigid, "one-size-fits-all" model across the diverse EU market. Unnecessary bureaucracy would stifle innovation and diminish the EU's attractiveness as a competitive crypto-friendly jurisdiction.

  
  

• SUBSIDIARITY AND PROPORTIONALITY: We ground our opposition in the EU's constitutional principles, arguing that CASPs are not systemically important banks like those overseen by the Single Supervisory Mechanism (SSM). Therefore, the stringent, centralized oversight model is disproportionate to the risk posed by the nascent crypto sector.

  
  

• FOCUS ON CONVERGENCE, NOT CENTRALIZATION: Operators in Malta do not advocate for regulatory divergence. Instead, the MFSA strongly supports supervisory convergence — making sure all NCAs apply the rules the same way—through ESMA-led initiatives like peer reviews and coordination forums, rather than dismantling local expertise.

A DEEP DIVE IN THE PROPOSED DRAFT

This summary organizes the extensive details of the EU's draft CMU legislative package, focusing on the centralization of supervision, reforms to market infrastructure, and key changes impacting funds and asset managers.

I. EXCLUSIONS (What is NOT Included)

The draft package excludes several major changes that had been previously rumored or consulted upon:

• No Tiering of Asset Managers: The draft avoids "systematicity" assessments that would lead to direct ESMA supervision of asset managers.

  
  

• No Mandatory Holding Companies: New consolidating entities (holding companies) are not mandated as a prerequisite for group recognition.

  
  

• No Extreme Venue Changes: Ideas like mandatory interconnectedness of trading venues are excluded.

  
  

• No New Macroprudential Framework: This is being developed separately by DG FISMA for Non-Bank Financial Intermediaries (NBFI) in 2026.

II. KEY GOVERNANCE & SUPERVISION SHIFTS

The package significantly increases ESMA's power and reconfigures its governance, maximizing its supervisory toolkit while stopping short of direct power over all asset management.

• Centralized Supervision: ESMA gains new direct supervisory powers over "significant" trading venues (TVs), CSDs, and CCPs.

  
  

• CASP Supervision: Supervision of all Crypto-Asset Service Providers (CASPs) is moved to ESMA. Why?

  
  

• ESMA Governance Overhaul: A new, independent "Executive Board" is introduced, distinct from the current 27-member Board of Supervisors (BoS), to focus on supervisory decisions related to individual NCAs.

  
  

• Intervention Powers: ESMA gains the power to issue opinions before an NCA grants approval if a "failure of supervision" by that NCA has been demonstrated (following an investigation).

  
  

• Regulatory Consistency: Rules for key infrastructure (Regulated Markets, MTFs, OTFs) are moved from the MiFID Directive to the MiFIR Regulation to reduce scope for divergent national interpretation.

  
  

• PEMO Concept: A new framework for Pan-European Market Operators (PEMOs) is recognized, allowing multi-entity groups (like Euronext) to voluntarily opt-in for ESMA supervision, simplifying internal "outsourcing" rules within the group.

III. MARKET INFRASTRUCTURE & TRANSPARENCY

• Consolidated Tape (CT) Enhancement: The equity and ETF CT will cover 5 levels of depth and attribution, and Systematic Internaliser (SI) quotes will also be required on the tape.

  
  

• Dismantling Access Barriers: Trading venues must offer members the right to designate any EU CSD for settlement ("right to designate any CSD").

  
  

• Open Access: MiFIR's open access provisions between CCPs and TVs are strengthened; "liquidity fragmentation" is removed as a legitimate ground for refusal. ESMA can now grant access if a request is not answered within three months.

  
  

• DLT Pilot Regime Review: Scope is extended to all products, the admission threshold is significantly raised to €100 billion (or €10 billion for simplified regimes), and CASP trading platforms are included.

IV. FUNDS & ASSET MANAGEMENT

The goal is to simplify cross-border marketing and strengthen ESMA's role in supervisory convergence without direct control over management companies (ManCos).

• Simplified Passporting: The host notification procedure is removed. The onus shifts to the home NCA, which notifies the host via a new ESMA documentation one-stop-shop. Funds enjoy unrestricted access to host markets upon home NCA notification.

  
  

• Tighter Prohibition on Local Requirements: Host Member States are strictly prohibited from imposing additional local presence or administrative requirements on foreign funds.

  
  

• ESMA's Supervisory Role (Funds): ESMA’s role is strengthened to mediate disagreements between host and home NCAs regarding cross-border marketing and to detect/address supervisory divergences. ESMA can also require "failing" NCAs to seek its opinion before authorizing cross-border marketing.

  
  

• Flexibility in Investment Policy: The single issuer limit for index-replicating UCITS funds is raised to 20%. The securitization single issuer limit is marginally raised to 15%.

  
  

• Large EU Groups Supervision: ESMA will conduct annual reviews of large EU asset management groups (defined by €300 billion AuM and multi-MS presence) focusing on delegation, governance, and risk management. This creates a "second-guessing" risk by effectively setting a common doctrine.

  
  

• Group Recognition (ManCos/AIFMs): The concept of an "EU group" is formally recognized, allowing entities within the group to utilize human and technical resources without it counting as delegation (provided the home NCA is informed).

  
  

• Depository Passport: The restriction requiring the depositary to be established in the same MS as the fund is removed, allowing AIFMs and UCITS to appoint a depositary anywhere in the EU.