EU Council backs crypto supervision reforms and expanded blockchain testing

European policymakers are seeking to address fragmented financial markets while widening the scope for testing digital-asset applications under a controlled regulatory framework.

The Council of the EU has agreed on the key elements of its negotiating position on the market integration and supervision package (MISP), a central component of the bloc’s savings and investments union. The measures aim to reduce fragmentation across European capital markets, lower compliance costs for cross-border financial firms and channel more private savings into business investment.

Under the proposed framework, the European Securities and Markets Authority (ESMA) would directly supervise the most significant cross-border trading venues, post-trading entities and crypto-asset service providers (CASPs). Unlike the European Commission’s original proposal, the Council’s approach would limit immediate direct supervision of CASPs to the most significant cross-border operators. The package would also reform ESMA’s governance structure while preserving a role for national authorities in regulatory decisions and supervisory cooperation.

The package also seeks to simplify cross-border operations for asset managers, including through an optional depositary passport that would allow funds to appoint depositaries in other EU member states. In addition, it would strengthen the existing distributed ledger technology (DLT) pilot regime, giving market operators greater scope to test digital-asset applications in a controlled environment and expanding the range of financial activities eligible under the framework.