EU Regulators Clash Over Crypto Supervision Authority

Malta’s Financial Services Authority (MFSA) disagrees. In a joint September 2025 position paper, the three countries argued that centralized oversight would address “major differences” in how member states authorize firms and prevent regulatory arbitrage. Malta countered that introducing structural changes is “premature” while MiCA’s impact is still being assessed.

MiCA allows firms to obtain authorization in one EU member state and passport services across the entire bloc. This creates a tension between market integration and investor protection. Centralization advocates say it would strengthen harmonization and reduce forum shopping risks.

Ian Gauci, architect of Malta’s original crypto rulebook, told Cointelegraph the dispute is not jurisdictional but structural. He warned that splitting supervision across ESMA, national authorities, and the Anti-Money Laundering Authority (AMLA) could fragment accountability during crises. The Digital Operational Resilience Act (DORA) expects integrated oversight of IT risks, he noted, making fragmented supervision counterproductive.

ESMA’s peer review of Malta’s CASP authorizations found Malta met supervisory expectations but suggested one firm’s authorization “should have been more thorough.” OKX’s European CEO, Erald Ghoos, countered that the exchange has operated under Malta’s high-standard regime since 2021 and that no evidence yet demonstrates the current model is failing.

Centralization proponents argue the peer review validates their case. Gauci advocates using existing tools instead, urging ESMA to “make peer reviews bite” and impose consequences for persistent failures rather than rewriting MiCA’s power allocation.

Gauci’s core worry centers on expertise erosion. Early regulatory movers built deep knowledge and proximity in a fast-moving industry. Stripping that away too quickly risks replacing it with distance, removing incentives for jurisdictions to invest in serious supervisory capacity. This could inadvertently encourage the offshore drift policymakers aim to prevent.

The real question, Gauci argues, is whether Europe values supervisory depth or scale. The answer will shape whether crypto firms remain anchored in EU jurisdictions or seek alternatives elsewhere.