TheChek News Flow

Measures aim to lure back high-skilled workers who moved abroad after 2023 war with Hamas

Israel has unveiled tax incentives to encourage high-tech workers abroad to return home, as part of a series of measures designed to make one of the country’s key economic sectors more competitive.

The measures come after officials said earlier this year that the number of Israeli tech workers leaving the country each month had jumped by about 45 per cent in the first nine months of the Israel-Hamas war that started in October 2023, causing widespread disruption to the Israeli economy.

The changes to lure back tech workers include an exemption from tax on income earned and accrued outside Israel, a mechanism to allow workers to offset taxes paid abroad against taxes due on income in Israel, and a clarification of the rules for taxing equity-based compensation.

They are accompanied by broader moves to bolster the Israeli tech sector — which accounts for a sixth of GDP and more than half of exports — including tax breaks for investors in Israeli funds and tech companies, and moves to regulate acquisitions of Israeli tech groups by multinationals.

Setting out the reforms on Sunday, Israel’s ultranationalist finance minister Bezalel Smotrich said they would foster the “simplicity of [Israel’s] tax processes and its regulatory certainty”.

Dror Bin, chief executive of the Israel Innovation Authority (IIA) — which is responsible for the country’s innovation policy — said the agency had been pushing for the incentives for high-tech workers. The IIA had carried out the research into the brain drain that accelerated after the war in Gaza.

“We don’t know yet if [the outflow] is people just going to refresh themselves abroad for a year or two and come back, or if it’s going to be longer. But human capital is what makes high-tech so successful. And we don’t want to be in a situation of a long-term brain drain,” Bin said.

He added that the tax incentives “probably should have happened regardless of the war”, but that “once we measured the phenomenon” of more workers relocating overseas, “it was good to go to deal with it”.

According to the IIA’s figures, between May and December 2022, 479 tech workers left Israel on average each month on a long-term relocation.

This number jumped 20 per cent in the first nine months of 2023, as Israeli society was convulsed by a series of protests over a controversial attempt by Prime Minister Benjamin Netanyahu’s far-right government to rein in the judiciary.

The number of departures then rose again to 826 in the first nine months of the war, according to the IIA’s estimates. A quarter of tech groups surveyed by the agency in November last year reported an increase in relocation requests from staff.

Bin said the innovation agency expected to carry out another assessment of departures in the coming months to collect data on more recent developments. Last month, a US-brokered ceasefire took effect in Gaza, raising hopes of an end to the fighting.

Neatsun Ziv, chief executive of Israeli tech start-up Ox Security, said that since the start of the war, he had heard from investors and new founders that their favoured way to establish companies was with a US parent company and an Israeli subsidiary, rather than vice versa, because of the instability in the Middle East.

But he said in his experience, decisions to relocate staff — including his own decision to move to the US last year — were to do with business rather than the war. “It’s simply that most of our business is here in the US, we’re growing really fast, and it needed more attention,” he said.

HEADLINE: OEM lead times for CCGT/GT now 4–7y → new gas capacity won’t arrive before AI-driven load shows up → tighter US power mkts through ’28.

KEY POINTS:
• Demand up: DC/AI + industrial load now driving incremental kWh; resi flat.
• Supply constrained: Only 3 real OEMs (GE Vernova, Siemens Energy, Mitsubishi). Orderbooks full, parts/labor tight → delivery 4–7y (IEA).
• Timing mismatch: Load is near-term, dispatchable capex is long-cycle. Until new units land, system leans on older/less efficient gas + imports → higher clearing prices.
• Policy overhang: If IRA support for renewables is cut post-’26, gas can’t backfill fast enough → even tighter.
• Narrative risk: AI already blamed for higher power bills (80% of consumers worried) → regulators may push costs to corporates, not households.

TRADES / EXPOSURE:
• Long backlog beneficiaries: GE Vernova (GEV), Siemens Energy (ENR GY) – multiyear revenue visibility, svc pricing power.
• Long diversified/renewables-heavy US utils: NEE / SO / DUK – can sell into tighter mkts w/o same capex lag.
• Long US LNG/export infra: LNG / CQP – domestic gas stays bid as power burn rises while exports still pull.
• Neutral→Short gas-heavy merchant IPPs w/ less fuel hedge: AES / some VST exposure – squeezed if fuel up + no quick cap add.
• RV: Long grid/transmission/hardware (ETN, GE Vernova power) vs. short pure-play high gas-burn gen.

CATALYSTS TO WATCH:

• PJM / ERCOT capacity auctions – confirmation via higher clearing prices.
• Hyperscaler DC announcements (MSFT/AMZN/GOOGL) w/ power offtake details.
• OEM earnings: backlog build, delivery slippage, price escalators.

BOTTOM LINE: This is not a 1–2q theme; it’s a duration constraint. Until 2028+, power price floor in US stays higher than the pre-AI regime → stay long assets that own capacity, fade names that need to build it.

US POWER – GAS TURBINE BOTTLENECK = STRUCTURAL TIGHTNESS

HEADLINE: OEM lead times for CCGT/GT now 4–7y → new gas capacity won’t arrive before AI-driven load shows up → tighter US power mkts through ’28.

KEY POINTS:
• Demand up: DC/AI + industrial load now driving incremental kWh; resi flat.
• Supply constrained: Only 3 real OEMs (GE Vernova, Siemens Energy, Mitsubishi). Orderbooks full, parts/labor tight → delivery 4–7y (IEA).
• Timing mismatch: Load is near-term, dispatchable capex is long-cycle. Until new units land, system leans on older/less efficient gas + imports → higher clearing prices.
• Policy overhang: If IRA support for renewables is cut post-’26, gas can’t backfill fast enough → even tighter.
• Narrative risk: AI already blamed for higher power bills (80% of consumers worried) → regulators may push costs to corporates, not households.

TRADES / EXPOSURE:
• Long backlog beneficiaries: GE Vernova (GEV), Siemens Energy (ENR GY) – multiyear revenue visibility, svc pricing power.
• Long diversified/renewables-heavy US utils: NEE / SO / DUK – can sell into tighter mkts w/o same capex lag.
• Long US LNG/export infra: LNG / CQP – domestic gas stays bid as power burn rises while exports still pull.
• Neutral→Short gas-heavy merchant IPPs w/ less fuel hedge: AES / some VST exposure – squeezed if fuel up + no quick cap add.
• RV: Long grid/transmission/hardware (ETN, GE Vernova power) vs. short pure-play high gas-burn gen.

CATALYSTS TO WATCH:

• PJM / ERCOT capacity auctions – confirmation via higher clearing prices.
• Hyperscaler DC announcements (MSFT/AMZN/GOOGL) w/ power offtake details.
• OEM earnings: backlog build, delivery slippage, price escalators.

BOTTOM LINE: This is not a 1–2q theme; it’s a duration constraint. Until 2028+, power price floor in US stays higher than the pre-AI regime → stay long assets that own capacity, fade names that need to build it.

As tech companies tout their plans for massive new data centers, consumers are increasingly worried the AI-driven gold rush will ultimately drive up the price they pay for electricity, according to a new survey.

The report, commissioned by solar installer Sunrun, found that 80% of consumers are worried about the impact of data centers on their utility bills.

Consumers’ concerns aren’t unfounded.

Electricity demand in the United States held steady for over a decade, according to the U.S. Energy Information Administration (EIA). Over the last five years, commercial users including data centers and industrial users began drinking more deeply from the grid, with annual growth rising 2.6% and 2.1%, respectively. Meanwhile, residential use only grew by 0.7% annually.

Data centers today consume about 4% of the electricity generated in the United States, more than double their share in 2018. By 2028, consumption is forecasted to rise to 6.7% to 12%, according to Lawrence Berkeley National Laboratory.

Generation has managed to meet demand thanks to a surge in new capacity from solar, wind, and grid-scale battery storage. Big tech companies have been inking large deals for new utility-scale solar, in particular, attracted by the energy source’s low cost, modularity, and speed to power. Solar farms can start delivering power to data centers before they’re completed, and a new project typically takes around 18 months to complete.

The EIA expects renewables to dominate new generating capacity through at least the next year. The trend likely would have extended beyond 2026, but experts predict a Republican repeal of key parts of the Inflation Reduction Act will hamper the renewables’ growth.

Meanwhile, natural gas, another source of energy favored by data center operators, hasn’t met the moment. Production has been rising, but most of the new supplies have gone toward feeding exports rather than the domestic market. Consumption by electricity generators rose by 20% between 2019 and 2024, while exporters consumed 140% more.

New natural gas power plants won’t be ready in time, either, since they take around four years to complete, according to the International Energy Agency. A backlog of turbines used by gas-fired power plants has only compounded the problem. Manufacturers are quoting delivery dates up to seven years out, and newly announced production capacity is unlikely to change things.

Slow natural gas buildouts coupled with kneecapped renewables have put data center developers in a bind.

While AI and data centers aren’t entirely responsible for increasing electricity demand — industrial users have been nearly as thirsty — they’ve been leading the headlines.

AI is likely to be the focus of consumers’ ire: More people are concerned about the technology than excited about it, according to a Pew survey. No surprise given that many employers have been wielding the tool as a way to cut headcount rather than improve augment employee productivity.

Throw rising energy prices into the mix, and you can begin to see how a backlash might be brewing.

What Investors Learned From Tech Earnings, in Charts

The so-called Magnificent Seven make up a record 38% of the S&P 500

Big Tech is driving big swings in the stock market.

Investors this past week finally got a look at earnings from some megacap technology companies—and their artificial-intelligence spending spree—and found a mixed bag.

Upbeat results from Amazon.com helped power the Nasdaq composite to a seventh straight monthly gain on Friday, its longest such streak since 2018. That came a day after investors punished Microsoft MSFT -1.51%decrease; red down pointing triangle and Meta Platforms for their spending plans, with Meta losing $215 billion of market value in a single session.

The rapid growth, high valuations and outsize influence of major AI players have some on Wall Street worrying about a tech-fueled bubble akin to the dot-com boom and bust.

Here’s a look at what investors learned from the reports:

Leading tech companies have already poured hundreds of billions of dollars into their AI efforts—but that bill is only going to get bigger next year. This past week, Meta, Alphabet GOOGL -0.10%decrease; red down pointing triangle, Microsoft and Amazon all told investors that they will increase spending in 2026.

The concern among some investors is that it is unclear how, and when, all that investment will start to pay off. The size of the boom implies that a massive shift in the economy would be needed to make current spending worthwhile.

There’s one key difference between the AI players of today and the dot-com names of two decades ago: The leaders of this market are making plenty of money. Both Meta and Alphabet reported record revenues this past week.

But all the AI spending is starting to take a toll: The 12-month cumulative cash flow for Meta, Alphabet, Microsoft, Apple AAPL -0.38%decrease; red down pointing triangle and Amazon has dropped in the past couple of years.

As the AI frenzy ratchets up, a few of the market’s tech titans have notched record-setting valuations.

On Wednesday, Nvidia NVDA -0.20%decrease; red down pointing triangle became the first company to hit $5 trillion in market value. Shares gained 8.7% over the course of the week, boosted by upbeat remarks from Chief Executive Jensen Huang at an event in Washington, D.C.

It wasn’t the only tech giant to reach a milestone this past week: Apple and Microsoft each closed above $4 trillion in market cap for the first time on record.

The so-called Magnificent Seven stocks—Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla TSLA 3.74%increase; green up pointing triangle—have never been more influential to the overall market. The group’s market capitalization now accounts for roughly 38% of the entire S&P 500 index, according to Dow Jones Market Data.

That means a move in just one can shift indexes. Nvidia’s market cap, for example, is larger than some entire sectors of the S&P 500, including utilities and consumer staples.

Once known for holding giant piles of cash and relatively little debt, tech giants have changed in recent years. While they still hold plenty of cash, they have added debt to fund share buybacks, and more recently have started borrowing heavily to fund their AI investments.

Recently, Meta issued $30 billion of bonds to fund “general corporate purposes” generally understood to mean AI spending. That came about a month after Oracle issued $18 billion of bonds, while it spends big on AI infrastructure.

Private capital zombie firms will pile up in next decade, says EQT chief

Per Franzén says inability to raise fresh funds may leave many firms only managing existing investments in coming decade

Eighty per cent of all private capital groups could be zombie firms within the next decade, according to one of the industry’s most senior executives, surviving only to manage existing investments because they cannot raise fresh capital.

Only about 5,000 of the 15,000 or more private capital firms that exist today had successfully raised funds in the past seven years, Per Franzén, chief executive of Sweden’s EQT, told the Financial Times.

“How many of these firms will have a successful fundraising also in the next five to 10 years? . . . Probably less than half,” he said. “The number of zombie firms will increase by an additional couple of thousand.”

Private equity groups have struggled to raise funds in recent years after finding it difficult to return cash to their backers because of a dealmaking drought.

Instead, private equity firms have sought to increase the amount of fees they can generate from existing funds, as well as leaning more heavily on continuation vehicles, a tool that buyout firms use to hang on to some assets by selling them to themselves.

Continuation vehicles have exploded in popularity in recent years and enable firms to generate new management fees on assets that they might have otherwise sold to outside buyers.

These structures could help compensate for a lack of fees from new funds. However Franzén said continuation vehicles were not a long-term solution.

“It’s not a sustainable business model to squeeze out fees out of . . . existing funds and to opportunistically raise continuation vehicles,” he said.

“That’s not going to help you attract and retain the best people in the industry,” he added. “At some point, these firms will cease to exist.”

Just 50 to 100 globally diversified firms would capture around 90 per cent of capital flowing into private markets in the next fundraising cycle, the Swedish executive predicted.

As of October, the number of private equity funds to reach “final close” this year was on track to be the lowest in at least nine years, according to Preqin data.

But Rob Lucas, chief executive of private capital group CVC, said that despite the fundraising difficulties the industry faced, there was nonetheless likely to be an influx of capital.

“If you look at the real headlines of the demand for private capital over the next decade or two, it is immense,” he said.

Private capital groups have set their eyes on the US retirement market, where the Trump administration earlier this year issued an executive order that enables 401k saving plans to invest in a range of alternative assets.

Firms are also increasingly targeting wealthy individuals as a new source of cash, including through semi-liquid structures listed on public markets.

“There will be firms that regenerate,” said Lucas. “I do think there’s real scope in the market for new firms to form and for the smaller firms to develop.”

Gold rally puts shine on cyanide producers

Suppliers of chemical used to process metal have rapidly expanded production on back of rising prices

Gold’s recent rally has boosted the prospects of cyanide producers as they increase production to meet rising demand for chemicals to process the metal.

Two of the largest suppliers of sodium cyanide, which is used to leach gold specks from crushed rock, said they had rapidly expanded production on the back of rising gold prices and increased mining activity.

Orica, which acquired US rival Cyanco for $640mn last year, plans to accelerate production as North American operators look to restart mothballed gold mines, said Andrew Stewart, head of Orica’s speciality chemicals division.

“We’re enjoying the volatility coming out of the White House,” he said, referring to the trade uncertainty from US President Donald Trump’s tariffs, which has driven much of gold’s record run.

Australian Gold Reagents, another sodium cyanide producer, this year applied to the state government to boost production capacity at its Western Australia facility to 210,000 tonnes a year in the future.

The company, which supplies miners in Africa, Australia, South America and south-east Asia, has already started to raise capacity by 30 per cent to 130,000 tonnes this year.

“Within chemicals, [the sodium cyanide plant] is one of our strongest return on capital investments and will continue to be so,” said Aaron Hood, managing director of Wesfarmers’ chemicals, energy and fertiliser division, which owns AGR.

The price of gold has risen 15 per cent in the past two months and hit an all-time high of $4,381.52 a troy ounce last week before settling at about $4,000 this week.

The sharp rally, partly driven by a dash to safer assets amid geopolitical uncertainty, comes as the mining sector undergoes consolidation and has spurred more mining activity.

Gold groups Newcrest, Northern Star and Gold Fields have acquired smaller rivals in the past two years, while smaller miners have begun to look at gold deposits previously deemed unviable.

Ramoun Lazar, an analyst with Jefferies, said the rally “incentivises gold exploration and, in turn, increases the demand for . . . sodium cyanide given ore bodies become deeper and harder to mine”.

Orica’s history dates to the Victorian gold rush of the 1870s when it supplied explosives to miners. It later became part of UK chemicals group ICI before being spun out in the 1990s. “We started in gold and we’ve gone back there,” said Stewart.

Wesfarmers, which started as a farmers’ co-operative and owns several Australian retail chains, has invested in a wide array of minerals and chemicals, including lithium.

But the sodium cyanide business, which it has owned alongside Coogee Chemicals since 1988, has been a “quiet achiever”, said Hood. “It’s one of our largest export businesses.”

The Australian companies compete with Czech chemicals group Draslovka and Chinese rivals, which make it as a byproduct of nylon manufacturing.

A longer-term threat to cyanide producers could be less toxic alternatives, said Paul Breuer, a scientist at the government research institute CSIRO, who has led a research team to develop an alternative gold leaching product called thiosulphate.

Breuer said government regulations on cyanide use were becoming more stringent — especially around the risk of the chemical entering water supplies — but it has been a struggle to convince the conservative gold industry to switch from a chemical considered effective and robust.

Wesfarmers’ Hood said he was unconvinced that alternatives would make much of a mark given the mining industry’s cost pressures, adding: “If you’re a metallurgist, why would you take the risk?”

A pipeline of skilled graduates is helping the UK build out its expertise in algorithmic trading

London is establishing itself as a centre for quantitative finance, with a number of trading firms and investors based in the capital becoming multibillion-dollar forces in the market.

Algorithmic trading firm XTX along with quantitative investors Qube and Quadrature have each made more than £1bn in revenues over the past year according to public filings by their UK entities, cementing their positions at a time when London’s status as a global financial hub has been called into question.

So-called “quant” trading firms and hedge funds use mathematical models combined with vast amounts of data and computing power to spot correlations and asymmetries in asset prices and make bets.

They rely much less on human input and, partly because of less onerous regulation, have quietly become some of the most dominant and profitable firms in the trading world.

Some of the biggest quant firms are based in and around New York but there is “absolutely” a quant renaissance in London, according to Raffaele Savi, global head of BlackRock’s quantitative investing teams.

“It’s the combination of great [universities] in the UK and Europe, a good regulatory framework, and tradition,” he said.

A US-based quant hedge fund manager commented: “It’s quite remarkable seeing the rise of London as a quant centre, perhaps even rivalling New York.”

When quantitative trading started to take off in the 1980s, some UK firms carved themselves a niche. One such example is AHL — now owned by Man Group — which pioneered a strategy known as trend following.

This spawned a generation of similar quantitative funds, such as Winton and Aspect.

These days, UK-based quant firms employ a wider range of strategies.

Qube focuses on market making and statistical arbitrage trading, a data-driven strategy based on assessing pricing differences between securities. Net revenues for its UK entity were £2bn last year, up almost sevenfold on 2020.

XTX, led by its billionaire founder Alexander Gerko, uses machine learning to forecast the price of assets including stocks, bonds, crypto and currencies. It made £1.3bn in profits after tax at its UK entities last year, a 54 per cent rise on 2023. Its revenues rose 36 per cent in the same period, hitting £2.7bn last year.

Showing the importance of computing power, it is spending more than €1bn to build its own data centre in Finland, while Qube is building a data centre in Iceland.

Revenues at Quadrature, which was founded in 2010, rose almost fivefold to £1.2bn between 2020 and 2024.

Another London quant business that has been doing well is research firm G-Research, which advises investment firms affiliated to its founder Peter De Putron. Two companies linked to the group that supply research and IT services alone made £712mn combined in the 15 months to the end of 2023, according to UK filings.

People familiar with the firm said its input powered sizeable quant trading revenues. G-Research did not respond to a request for comment.

The growth of these firms in London has been helped by a pipeline of skilled graduates from UK universities — in contrast to the US, where engineering and computing graduates often join big tech companies. Quant groups often sponsor student society events, hackathons and PhD programmes in the UK.

“After the global financial crisis, London as a city had some cracks in it,” said Paul Rowady, founder of trading consultancy Alphacution. “You’re now seeing a wave of lots of very talented and smart people coming through.”

Quant firms can also offer very high pay and a more relaxed working environment than comparable finance or tech jobs.

“Only a handful of people went into big tech in our year, whereas dozens joined market makers or quant hedge funds,” said one recent computing graduate from Imperial College London who now works at a quant hedge fund.

Alvaro Cartea, director of Oxford university’s quantitative finance institute, said almost all his students ended up working at trading firms, on salaries from £250,000 to £800,000.

“If you get offered a salary less than £250K, you’re kind of the sad guy,” he said, adding: “Nobody I know interviews for JPMorgan, Goldman Sachs . . . not once do I hear anybody entertain any of these traditional investment banking jobs.”

No new planes for UK if taxes keep rising, warn Ryanair and Wizz Air

Low cost airline bosses are braced for increase in air passenger duty

Two of the UK’s largest low cost airlines have warned that raising taxes on the sector will push carriers to shift planes out of Britain in the future. 

Senior executives from Ryanair and Wizz Air have separately warned about the risk to UK growth from increasing charges in the Budget. 

Airports are concerned that a feared jump in business rates will force them to raise prices, while airlines are braced for another increase in air passenger duty, which is already the highest in the world. 

“It’s definitely a risk that aviation in the UK could be very growth stunted,” said Michael Delehant, chief operations officer at Wizz Air. 

He cited Wizz’s recent decision to pull all its flights from Vienna over rising airport costs, and relocate planes over the border in Slovakia’s Bratislava. 

“When you’re at the price sensitive part of the chain, you have to and you can’t just accept [higher prices],” he told the Financial Times. “Vienna was the perfect example. That’s your case study.” 

In a separate warning, Eddie Wilson, chief executive of Ryanair, said that raising air passenger duty would result in the airline using fewer new planes on UK routes.

The comments follow Gatwick’s warning last week that a sharp rise in business rates at the airport could jeopardise upcoming investment decisions, including its expansion to build a second runway. 

Wizz flies from both Gatwick and Luton, and has 19 aircraft based in the UK. It is the airline’s second largest centre of operations outside of Hungary. 

Delehant warned that Gatwick’s prices were already “unsustainable,” with the airport the most expensive in Wizz’s network. 

If the company is “trying to offer its ultra-low fares, and already before you leave the gate you’re paying €50, €60, it’s not sustainable,” he said. “People won’t buy it.”

Trade body Airports UK has calculated that each plane stationed in the UK supports around 400 jobs and adds some £27mn of economic benefit to the economy each year. 

While airports are concerned about rising business rates, ministers have already raised Air Passenger Duty that airlines pay to record levels. The industry is braced for an inflation-linked rise this year, although there have been reports that Reeves could look to raise it even higher. 

While the Labour government wants to decarbonise the UK’s aviation sector, Reeves has also been a vocal proponent of airport expansion as a way of injecting growth into the economy. 

Wilson told the FT that Reeves raising air passenger duty any further would see Ryanair divert future aircraft orders to cheaper locations. 

He said the airline has cut some services from Newquay in Cornwall in favour of Sweden, which has abolished air passenger duty. The tax changes mean the gap between the two destinations was €20. “When our average fair last year was just over €50, that’s massive,” he told the FT. 

Ryanair has 300 new aircraft on order, and will allocate them across Europe according to the most profitable routes it can fly. This means that growth earmarked for the UK would be diverted elsewhere if taxes rise, he warned. 

Airlines are “the most mobile investment in the world”, he added. “But the dull grey people in the Treasury don’t see that, they think the aeroplanes are just there. It means the decision to allocate growth won’t go where you have rising taxes.” 

Esma to also settle disputes between large asset managers, according to proposals

The European Commission is drawing up plans to expand central supervision over key financial markets infrastructure, including stock exchanges, crypto exchanges and clearing houses, in an effort to eliminate fragmentation in one of the single market’s core areas.

The move is part of a broader effort to bolster the EU competitiveness in relation to the US by ensuring that companies can access funding and scale up on the continent rather than across the Atlantic. The current landscape, with dozens of national and regional regulators and hundreds of trading and post-trading institutions, raises the costs for cross-border trades, a significant obstacle for start-ups to scale up in Europe.

A single supervisor modelled after the Securities and Exchange Commission in the US is seen as a significant step to completing the EU’s “capital markets union”. The move is backed by ECB President Christine Lagarde and her predecessor Mario Draghi, who mentioned this in a report he drafted last year on improving Europe’s competitiveness.

The commission has said it will put forward proposals in December for a “markets integration package”.

The most contentious idea is to expand the powers of the existing European Securities and Markets Authority (Esma) to also cover “the most significant cross-border entities”, including stock exchanges, crypto assets service providers, and post-trading infrastructure such as central clearing counterparties and central securities depositories, according to people briefed on the matter.

The commission will also call for Esma to have the last say on disputes between large asset managers. While not directly in charge of supervision, Esma would issue binding decisions in case of disputes between national supervisory authorities, the people said. 

Central supervision has long been opposed by Berlin, but the government led by Chancellor Friedrich Merz has recently signalled openness and is exploring options together with France, a strong backer of the capital markets union. The Financial Times previously reported that the asset management industry was among the areas where the German government could envisage Esma supervision, but not crypto exchanges.

Other capitals, notably Luxembourg and Dublin, are still balking at the idea of handing over oversight powers to the Paris-based authority. They argue that the move could disadvantage their national financial sector, as they remain sceptical that EU regulators would act in the best interests of smaller nations.

“We would like to have [supervisory] convergence rather than creating a costly and ineffective centralised model,” said Gilles Roth, Luxembourg’s finance minister.

One European exchange group said it saw little benefit in shifting oversight of crypto assets service providers to Esma, citing a good working relationship with its national supervisor, and expressing concerns about higher compliance costs and potential Esma over-reach.

“Expanding Esma’s supervisory responsibilities would mean higher fees paid by the industry,” said Marin Capelle, policy adviser at Efama, the fund industry lobby.

The commission said it was “still exploring the potential of EU level supervision in relation to some critical infrastructures, such as central counterparties, central securities depositories and trading venues, as well as in relation to big cross-border entities such as asset managers”.

“We are considering different models for single supervision . . . from the perspective of balancing the EU interest with local expertise,” it added.