ECB CALLS FOR STRONGER CRYPTO OVERSIGHT UNDER MICA

In brief: 

₿- The ECB has proposed stronger EU-wide supervision of crypto-asset service providers and enhanced prudential requirements for major firms under the MiCA review.

₿- The central bank supports allowing banks to issue e-money tokens directly under their existing balance-sheet model, while maintaining technological neutrality.

The European Central Bank (ECB) has outlined several proposals for updating the European Union’s Markets in Crypto-Assets Regulation (MiCA). While the ECB recognises the potential of blockchain technology and tokenization, it also warns that the rapid expansion of digital-asset markets could create new risks for consumers, banks and financial stability.

The response to the European Commission’s consultation presents MiCA as an important foundation, but argues that the framework must evolve alongside increasingly complex, international and interconnected crypto markets.

Greater  oversight of crypto companies

One of the ECB’s main recommendations is to strengthen the supervision of crypto-asset service providers (CASPs), including exchanges, custody firms and trading platforms. The central bank supports transferring greater authorisation, monitoring and enforcement powers to the European Securities and Markets Authority (ESMA).

A centralised approach could reduce differences between national regulators and make enforcement more consistent across the EU. It could also improve oversight of firms operating across multiple jurisdictions. However, stricter supervision and higher capital requirements may increase compliance costs, particularly for smaller crypto businesses and new market entrants.

The ECB also supports enhanced prudential rules for significant CASPs, along with closer supervision of large groups that combine crypto services with other financial activities. Major firms may eventually be required to establish an intermediate parent company within the EU.

Stablecoins raise financial stability questions

Stablecoins are a central issue in the ECB’s analysis. Their use in payments and decentralised finance could improve transaction speed and accessibility, but widespread adoption could also affect bank funding, monetary policy transmission and market stability.

The ECB believes that the criteria for identifying significant asset-referenced tokens and e-money tokens should better reflect their global reach. It also highlights risks linked to multi-issuer stablecoin arrangements, particularly where responsibility is divided between several entities or jurisdictions.

The institution calls for a clearer definition of “Union holders” to improve legal protection for individuals and businesses using stablecoins. These rules should also address self-hosted wallets, which operate without a traditional intermediary.

Innovation balanced against risk

The ECB supports allowing credit institutions to issue e-money tokens directly under the existing balance-sheet model. It does not favour mandatory segregated reserves for bank-issued tokens, arguing that such a requirement could disadvantage depositors and conflict with technological neutrality.

At the same time, it supports retaining the ban on remuneration for e-money tokens, reinforcing their role as payment instruments rather than savings products.

Overall, the ECB’s position combines support for responsible innovation with concern about regulatory gaps, cross-border activity and systemic risk. The MiCA review is therefore likely to focus on finding a middle ground: encouraging digital-finance development while ensuring that crypto markets remain transparent, resilient and properly supervised.