European Commission Adopts Significant Capital Market Integration And Supervisory Convergence Package

On 4 December 2025, as part of the EU Savings and Investments Union (SIU) strategy, the European Commission adopted a package of measures aimed at removing barriers and unlocking the full potential of the EU single market for financial services.

Implementing the SIU requires comprehensive policy measures which are grouped under four interconnected pillars:

• citizens and saving;
• investments and financing;
• market integration and scale; and
• efficient supervision.

This legislative initiative focuses on market integration and scale and efficient supervision. The measures announced would significantly impact the current EU regulatory and supervisory framework.

The package comprises three legislative proposals, namely: proposals for a Master Regulation and a Master Directive to amend several existing pieces of EU capital markets legislation and a proposal for a Settlement Finality Regulation to amend the Financial Collateral Directive and repeal the Settlement Finality Directive.

Overview of proposed measures

Removing obstacles to market integration and leveraging scale

The package aims to eliminate barriers to integration in trading, post-trading, and asset management, enabling market participants to operate more seamlessly across EU Member States and reducing cost differences between domestic and cross-border transactions. The proposed measures include:

• enhancing passporting opportunities for Regulated Markets (RMs) and Central Securities Depositories (CSDs),
• introducing ‘Pan-European Market Operator' (PEMO) status for operators of trading venues to streamline corporate structures and licenses into a single entity or single license format; and
• streamlining the cross-border distribution of investment funds (UCITS  and AIFs) in the European Union.

Facilitating innovation

The package focuses on removing regulatory barriers to innovation related to distributed ledger technology (DLT) and adapting the regulatory framework to support these technologies.

Changes to the DLT Pilot Regulation (DLTPR) are designed to relax limits, increase proportionality and flexibility and provide legal certainty in order to encourage the adoption of new technologies in the financial sector.

Streamlining supervision

Changes to the supervisory framework are intended to remove regulatory barriers and address inconsistencies and complexities arising from fragmented national supervisory approaches. The objective is to make supervision more effective and conducive to cross-border activities, while being responsive to emerging risks.

This would include transferring direct supervisory competences over significant market infrastructures such as certain trading venues, Central Counterparties (CCPs), CSDs and all Crypto-Asset Service Providers (CASPs) to the European Securities and Markets Authority (ESMA) and enhancing ESMA's coordination role for the asset management sector.

Direct supervision of CASPs by ESMA

The proposed package provides that supervision of CASPs under the Markets in Crypto Assets Regulation (MiCAR) will ultimately be transferred from national competent authorities to ESMA, such that ESMA will become responsible for the authorisation, ongoing supervision and enforcement of MiCAR in relation to CASPs, including the provisions that relate to market abuse for the crypto-asset sector.

Firms that are allowed to provide crypto-asset services without being required to obtain an authorisation (e.g. investment firms) as a CASP, would continue to be supervised by the competent authorities that granted them authorisation under other European Union acts.

However, if the provision of crypto-asset services becomes the main activity of these entities, the supervision of all their activities would be transferred to ESMA (except for banks, as they are already subject to a highly harmonised supervisory regime and rulebook). Crypto-asset services will be considered to be the main activity of an entity where more than 50% of its total turnover in two consecutive years is generated from the provision of crypto-asset services.

To avoid disruption to existing CASPs, the amendment introduces provisions to facilitate the smooth transition of supervision from national competent authorities to ESMA including for applicants whose application for a CASP authorisation is currently being assessed by national competent authorities but has not been concluded.

It proposed that the responsibilities, competences and duties relating to the supervision of CASPs under MiCAR be transferred from national competent authorities to ESMA 24 months after the regulation's entry into force.

Simplification and burden reduction

Other proposed reforms include further simplification of the capital markets framework by converting directives into regulations, streamlining level 2 empowerments, and reducing national options and discretions to prevent gold-plating.

Further detail on the proposed package of legislation

1. A regulation which will amend:

• The ESMA Regulation;
• The European Markets Infrastructure Regulation (EMIR);
• The Markets in Financial Instruments Regulation (MIFIR);
• The Central Securities Depositories Regulation (CSDR);
• The Distributed Ledger technology Pilot Regulation (DLTPR);
• The Markets in Crypto-Assets Regulation (MiCAR);
• The Cross-Border Distribution of Funds Regulation (CBDR).

The regulation will also include targeted amendments, in line with the changes proposed to the ESMA regulation aimed at making EU supervision more efficient, to:

• The Central Counterparties Recovery and Resolution Regulation (CCPRRR);
• The Securities Financing Transactions Regulation (SFTR);
• The Credit Ratings Agency Regulation (CRAR);
• The Benchmark Regulation (BMR);
• The simple, transparent and standardised (STS)  Securitisation Regulation;
• The European Green Bond Regulation (EuGB Regulation);
• The Environmental, Social and Governance (ESG) rating Regulation.

 2. A directive to amend:

• The Undertakings for Collective Investment in Transferable Securities (UCITS) Directive;
• The Alternative Investment Fund Managers Directive (AIFMD);
• The Markets in Financial Instruments Directive (MiFID).

3. A Regulation replacing the Settlement Finality Directive (SFD) and amending the Financial Collateral Directive (FCD).

Next steps

The proposals must now be negotiated and approved by the European Parliament and the Council of the EU. The Commission has stated its intention to collaborate closely with the EU institutions and other stakeholders to ensure the swift and effective implementation of these measures.

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