Mario Draghi Advocates for US SEC-like Regulator, a Potential Game Changer for EU Capital and Crypto Markets
Draghi's proposal to strengthen ESMA as a unified regulator, like the US SEC, could reshape EU crypto markets by standardizing regulations. l Credit: Thomas Lohnes/Getty Images
- Mario Draghi’s report recommends transforming the EMSA into a unified regulator.
- ESMA would then become similar to the U.S. SEC.
- A centralized ESMA could standardize cryptocurrency regulations across the EU, reducing fragmentation and making compliance easier for crypto firms.
Former European Central Bank governor and Italian prime minister Mario Draghi has proposed a sweeping overhaul of EU financial regulations.
The fomer Premier recommended that the European Securities and Markets Authority (ESMA) should be transformed into a centralized authority similar to the U.S. Securities and Exchange Commission (SEC).
Draghi’s proposal looks to reshape EU regulation, but its effects on crypto regulation, investor protection, and market dynamics remain a topic of debate.
Draghi’s Plan For ESMA
Draghi’s report urges the EU to accelerate reforms of its capital markets and financial regulations, which have stalled for years.
It highlights the need for harmonization of insolvency and withholding tax laws across member States, which are currently fragmented and hinder cross-border investments.
The report recommends empowering the ESMA to become a unified regulator, akin to the SEC, rather than its current role as a coordinator of national regulators.
It also suggests simplifying regulations to encourage household savings and investment.
Finally, the report proposes reducing the number of areas where EU member states have a veto, such as tax and foreign policy. It advocates for more decisions by qualified majority voting rather than requiring unanimous agreement.
Potential Impact On Cryptocurrencies
Mario Draghi’s proposal to strengthen the ESMA into a “single common regulator” could significantly impact the EU’s cryptocurrency market.
A centralized ESMA would help standardize crypto regulations across the EU, reducing fragmentation and regulatory loopholes.
It would make compliance easier for companies operating in multiple countries.
At the same time, a stronger ESMA would likely enforce stricter investor protections, including transparency, anti-money laundering (AML), and Know Your Customer (KYC) requirements, which would reduce fraud and boost consumer confidence, though at the cost of higher compliance expenses for crypto firms.
Aligning with U.S. SEC standards could also improve cross-border consistency, easing the operational challenges for crypto firms in both regions.
However, despite its far-reaching implications, Bepi Pezzulli, financial expert and director of research at Italia Atlantica, criticized Draghi’s proposals.
He told CCN: “Draghi’s plan for Europe is a Schrödinger’s cat moment—pushing for more deregulation while simultaneously centralizing power. Amidst this contradictory approach, he’s thrown in an €800 billion cheque. This means he’s treating public spending as a cure-all for the crisis while calling it genius.”
“The EU’s capital markets swing erratically between chaos and utopia, exacerbated by a single market that speaks 24 languages, adopts 19 currencies, and contends with a patchwork of tax and bankruptcy laws at the member state level. As for crypto, Draghi’s strategy appears to promote crypto-socialism—more about state control than true innovation,” Pezzulli expressed.
Current Crypto Regulation in the EU
The EU’s regulatory landscape is quite complex.
Existing regulations, such as the Markets in Financial Instruments Regulation (MiFIR), already provide a framework for certain crypto assets that meet the definition of financial instruments.
Crypto service providers are also subject to AML and counter-terrorism financing (CFT) directives, which require customer due diligence and the reporting of suspicious activities.
Additionally, the General Data Protection Regulation (GDPR) ensures that crypto-related activities are conducted with robust data protection standards.
Alongside these regulations, ongoing efforts are underway to shape the regulatory landscape.
The Markets in Crypto-Assets Regulation (MiCA) seeks to establish a unified regulatory framework for crypto assets across the EU. MiCA addresses critical areas such as market integrity, consumer protection, and financial stability and introduces new licensing requirements for crypto service providers and other market participants.
The Digital Finance Package, a broader initiative, supports MiCA and promotes digital finance development in the EU. It also covers regulations on tokenized securities and stablecoins, providing a comprehensive approach to digital finance regulation.
Meanwhile, the Blockchain Observatory, a joint project between the European Commission and the European Central Bank (ECB), monitors the progress of blockchain technology in the financial sector, providing valuable insights to inform regulatory decisions.
An EU lawmaker addressed the importance of these regulations to CCN anonymously, as they did not have the authority to discuss the matter publicly.
“We should consider several challenges. These include the difficulty of coordinating regulatory efforts across member states in a global crypto market. But also the fast pace of technological advancements,” they added.
The source shared, “I believe that the EU needs to balance innovation with investor protection and financial system stability. ”
They also stressed the importance of international cooperation. “International cooperation is also key, as the EU works with global partners to develop standards for crypto regulation,” they asserted.
“Overall, the EU’s proactive approach acknowledges both the potential benefits and risks of digital assets. I think MiCA and other initiatives will play a crucial role in shaping the future of the crypto market in Europe,” the anonymous source concluded.
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