Bank of France Demands Direct ESMA Control Over Crypto Exchanges

France wants the European Union to hand direct oversight of major cryptocurrency firms to ESMA, the bloc's top markets regulator. The proposal would end the current system where companies get licensed in one member state and operate across all 27.

Bank of France Governor François Villeroy de Galhau outlined the plan Thursday, warning that existing rules create loopholes. Companies now shop for the most favorable licensing jurisdiction, then passport their approval throughout the EU without consistent supervision. This system has allowed smaller member states with lighter regulatory approaches to become popular destinations for crypto firms seeking European market access.

The change would hit crypto exchanges hard, particularly those offering leveraged trading products. Platforms facilitating crypto futures, contracts that allow traders to speculate on the future price of digital assets, would move under direct ESMA supervision instead of national regulators. These contracts allow investors to hedge against volatility or amplify gains through leverage, but stricter oversight could limit accessibility and reshape how such products are offered across Europe.

Villeroy de Galhau paid a lot of attention to the idea of stablecoins by stating that the EU should have stricter regulations on cross-border issuance. He stressed that with one and the same stablecoin being issued both within and outside the European Union, arbitrage will arise when the market becomes stressed, which is especially worrying, given that 90% of global crypto-trade occurs on just ten platforms.

Circle and Paxos both operate under MiCA's multi-issuance framework, holding reserves in one EU country while issuing equivalent tokens elsewhere. Circle got its French electronic money license last year and now runs European USDC operations from there. The company manages billions in stablecoin volume across European markets. France questions whether this setup holds up during market crashes, especially with the European crypto market projected to reach €1.8 trillion by year end.

The European Central Bank backs similar restrictions, which puts pressure on US-based stablecoin issuers. USDC is Europe's biggest dollar-pegged stablecoin, so any regulatory changes would ripple through the market. Tighter controls could force operational restructuring for companies that built their European strategy around the current multi-issuance framework.

ESMA is working with national authorities on supervisory convergence during MiCA's transitional phase to ensure consistent authorization practices across member states. The European Commission is developing legislation that would give ESMA direct supervisory authority over crypto firms, shifting from its current advisory role to active enforcement powers.

Member states must agree to cede regulatory control. Some countries benefit from the current system, where crypto firms flock to their jurisdictions for licenses. France's push depends on whether enough members value centralized oversight over competitive advantage, especially with over 65% of EU-based crypto businesses already MiCA-compliant.

The proposal reflects how the EU handles financial regulation differently from other jurisdictions. The bloc wants unified rules and enforcement rather than internal competition. Centralized supervision means one set of rules and one enforcement body with the power to revoke EU market access.