BaFin warns on centralizing EU crypto oversight

TLDR

A senior BaFin official is warning that centralizing EU crypto supervision under MiCA could add burdens for firms and weaken national regulators role.

1. BaFins Stephan Mgelin says moving authorizations to an EU level supervisor like ESMA could force firms through extra processes and reduce flexibility in how MiCA rules are applied.
2. Central supervision could help consistency but might slow licensing and weaken local expertise, affecting how fast exchanges, custodians and token projects get EU-wide access.
3. The EU is still debating ESMAs role and reviewing MiCA, so the key watchpoints are future reforms on who licenses significant crypto providers and how fast those rules change.

Deep Dive

1. What BaFin Is Warning About

At the European Blockchain Convention, BaFin official Stephan Mgelin cautioned that fully centralizing MiCA supervision at EU level could place extra burdens on crypto firms and reduce regulatory flexibility.

Under MiCA, crypto asset service providers currently obtain authorization from a national regulator, then passport that license across the European Economic Area. Mgelin noted that shifting key responsibilities to a central EU supervisor would mean firms that already completed national authorizations might have to redo parts of the process, adding operational work.

He pointed to the EMIR experience, where a central supervisor led to more uniform, less locally tailored application of rules, and argued that national authorities still hold critical knowledge of local markets and business models.

2. How Centralization Could Affect Crypto Firms

Central supervision could deliver more consistency across the EU, but Mgelin warned it may reduce the room to account for local market specifics and business models. A central body would still depend on national regulators insight, which introduces coordination costs.

He also highlighted that EU private law on crypto ownership, transfer and insolvency is not harmonized. That means the same token can be treated differently across countries even if MiCA is applied from Brussels. Without fixing those underlying legal gaps, centralizing supervision risks adding bureaucracy without fully solving fragmentation.

For firms, the risk is a double layer of oversight: national processes plus central review, which can delay launches, increase legal costs and make experimentation harder, especially for smaller providers.

3. What To Watch Next In The EU

The European Commission has proposed reforms that would give ESMA direct supervisory responsibility for crypto asset service providers, but this is still being negotiated and is not yet law. A Council discussion in June showed many member states prefer ESMA to supervise only significant providers rather than all firms.

At the same time, the Commissions MiCA review and targeted consultation remain open, with legislative amendments possible once feedback is processed. This is the main vehicle for any shift toward more central oversight.

For users and projects, the practical trigger to watch is any final political agreement on ESMAs mandate and on which firms qualify as significant, since that will determine who must deal directly with an EU supervisor instead of just a national authority.

Conclusion

BaFins warning puts a spotlight on a key fault line in Europes crypto regime: how much power should move from national regulators to Brussels-level supervisors under MiCA.

If ESMA gains a larger role, the result could be more consistent but more centralized oversight, which may help large cross border players yet slow or complicate licensing for others.

The balance that EU lawmakers strike in the coming MiCA review will shape how easy it is for exchanges, stablecoin issuers and other providers to access the EU market and how resilient that regime is against political or institutional turf battles.