Brussels, Belgium – The European Commission on Thursday presented a package of measures designed to enhance the competitiveness of the EU’s capital markets, aiming to make cross-border operations easier and strengthen oversight through the European Securities and Markets Authority (ESMA). The proposals are part of the EU’s broader effort to compete with economic rivals such as the United States and China.

While the EU’s single market functions effectively for goods, it remains fragmented for services and financial operations, limiting its ability to fully leverage private savings and capital investment. According to former Italian Prime Minister Enrico Letta, steering Europe’s €33 trillion ($38.53 trillion) of private savings toward the real economy could have a transformative impact. Currently, around a third of these savings are kept in current accounts, while €300 billion of family savings flow abroad, mainly to the U.S., highlighting deficiencies in EU capital markets.

Key Goals of the EU Plan

The Commission’s proposals, which require approval from both EU member states and the European Parliament, aim to:

• Ease cross-border operations with enhanced passporting for regulated markets and central securities depositories (CSDs).
• Streamline corporate structures and licensing requirements for pan-European trading venues into single entities.
• Relax restrictions on digital ledger technology, including blockchain applications underlying crypto assets.
• Expand ESMA’s oversight powers over trading venues, central counterparties, CSDs, and crypto-asset providers, while strengthening its coordinating role for asset management.

Crypto Regulation and Member State Divergence

While France has strongly advocated for greater powers for ESMA, particularly in crypto supervision, resistance remains among other EU members. Regulators in France, Italy, and Austria support ESMA taking over oversight of major crypto firms, whereas Malta opposes expanding ESMA’s crypto regulatory authority, following scrutiny over its license-granting processes earlier this year.

Context: EU vs. U.S. Capital Markets

The EU’s stock exchanges remain undercapitalized compared to the U.S., with market capitalization equivalent to 73% of GDP, versus 270% in the United States in 2024. By enabling greater efficiency in trading and investment flows, the EU hopes to retain more savings domestically and boost long-term economic growth and investment competitiveness.

If adopted, the proposals could accelerate pan-European trading integration, facilitate digital innovation in financial markets, and strengthen Europe’s position in global capital markets, while supporting sustainable investment and corporate governance reforms.