The Governor of the Bank of France, François Villeroy de Galhau, urged the EU to designate its markets regulator, ESMA, with direct oversight over significant cryptocurrency firms. He cautioned that having fragmented regulatory authority could undermine the financial sovereignty of the European Union.

During a speech at the ACPR-AMF Fintech Forum in Paris, Villeroy de Galhau emphasized that ESMA should be entrusted with overseeing crypto-asset issuers as part of the EU’s Markets in Crypto-Assets (MiCA) regulations. He remarked, “I also advocate, along with the president of the AMF, for European supervision of crypto-asset issuers, carried out by ESMA,” pointing out that such a move could enhance the uniform application of regulations and mitigate associated risks.

Villeroy de Galhau highlighted the need for cohesive regulatory practices, warning that relying solely on national regulators could lead to inconsistent enforcement within the EU, especially given the rapid growth of crypto companies.

Concerns Regarding Stablecoins

He also raised alarms about the potential risks stablecoins pose to the Euro, describing the current flexibility for multi-issuing tokens under MiCA as a regulatory vulnerability. He noted that firms could issue the same stablecoin in different jurisdictions while maintaining only partial reserves.

Villeroy de Galhau’s comments align with growing trepidation among officials regarding the impact of dollar-pegged stablecoins. On September 19, Chiara Scotti from the Bank of Italy expressed similar concerns, noting that the multi-issue model could jeopardize financial stability.

In light of these apprehensions, the European Systemic Risk Board (ESRB) recommended on October 1 prohibiting this practice, increasing pressure on EU regulators to tighten control over stablecoin operations.

Call for Stricter Regulations

Villeroy de Galhau concluded by stating the urgency for finalizing a unified European regulatory framework. He advocated for much stricter regulations surrounding the multi-issuance of stablecoins to mitigate arbitrage risks during financial turbulence.

Furthermore, Villeroy de Galhau’s observations coincided with the European Commission’s exploration to shift crypto oversight from national regulators to ESMA. The chair of ESMA, Verena Ross, highlighted that this reorganization would foster a more integrated and competitive marketplace for the EU.

Passporting Challenges in EU Regulation

New features under the MiCA framework enable regulated crypto firms to leverage ‘passporting,’ granting them cross-nation authorization throughout the EU. This mechanism aims to simplify market entry and curb redundant applications; however, it also risks exposing regulatory weaknesses when national oversight falters.

Villeroy de Galhau’s remarks come amidst earlier criticisms from ESMA and the Autorité des Marchés Financiers (AMF) of inconsistencies in regulatory enforcement, particularly related to Malta’s crypto company licensing.