The European Commission has unveiled plans to establish a “super-regulator” to oversee the region’s financial markets, aiming to increase autonomy from the United States and enhance economic competitiveness. The proposed regulator, the European Securities and Markets Authority (ESMA), would assume supervision of cryptocurrency markets, license market players, and oversee significant financial market infrastructure, such as stock exchanges and post-trading service providers.

The move is part of a broader effort to create a unified capital market in the European Union, allowing for more seamless operation across the 27-nation bloc. The Commission believes that more integrated capital markets are essential for fortifying the EU’s economic strength and achieving strategic priorities, including competitiveness, digital and green transitions, defense, and security.

Currently, EU financial markets are fragmented, small, and lack competitiveness, with stock market capitalization roughly 73 percent of gross domestic product, compared to 270 percent in the United States. The Commission’s proposals aim to address this issue by increasing opportunities for market participants to operate across the bloc and creating a pan-European status for trading venues.

The plan would also grant ESMA an independent executive to carry out its new responsibilities, which would include supervising large asset managers. However, not all EU countries support the transfer of control over financial markets to ESMA, with Luxembourg and Germany expressing concerns about maintaining national regulation and protecting their financial hubs.

The Commission’s proposals must now be negotiated with lawmakers in the European Parliament and member states for adoption. The transfer of supervision and licensing of crypto assets has also sparked controversy, with some countries accused of being too lenient in their regulation. The EU’s financial services commissioner, Maria Luis Albuquerque, emphasized that inaction would lead to a Europe that invests too little, grows too slowly, and loses ground geopolitically and economically.

The establishment of a unified capital market is seen as a crucial step towards enhancing the EU’s economic competitiveness and reducing its dependence on the United States. The Commission’s proposals will be closely watched by market participants, regulators, and lawmakers as they navigate the complex process of creating a more integrated financial system in the EU.