Key Takeaways
- The paper emphasises the need to shield EU-based investors and MiCA-compliant CASPs from undue influence by non-MiCA-compliant entities.
- ESMA will accept public consultation on both papers until the end of April
The European Securities and Markets Authority (ESMA) has taken a significant step in shaping the regulatory landscape for crypto assets in the European Union (EU). In two consultation papers released on January 29, ESMA focused on creating standards and guidelines for implementing the Markets in Crypto-Assets (MiCA) regulation.
The first consultation paper, seeking comments until April 19, 2024, outlines guidelines to provide clarity under the MiCA rules, passed last year. ESMA aims to ensure that clients of crypto asset service providers (CASPs) benefit from full rights and protections granted by MiCA. The paper emphasizes the need to shield EU-based investors and MiCA-compliant CASPs from undue influence by non-EU and non-MiCA compliant entities.
To achieve this, non-EU firms would be prohibited from solicitation activities within the EU. Solicitation includes advertising, sponsorship deals, and even influencer or celebrity endorsements. ESMA emphasizes a broad interpretation of “person soliciting,” encompassing the third-country firm or any entity or person on its behalf. However, the relationship between the third-country firm and the person soliciting doesn’t necessarily need to be contractual. An exemption is provided if the client, at its own initiative, contacts the firm and requests the service.
The second consultation paper, also released on the same day, focuses on crypto as a financial instrument. It clarifies that crypto assets falling outside the scope of other EU legal frameworks applicable to financial instruments are likely but not automatically subject to the MiCA framework. ESMA will accept public consultation on both papers until the end of April, with guidelines expected to be issued by late December in accordance with MiCA.
ESMA’s move aligns with its mandate to develop technical standards and guidelines for specific MiCA provisions. The limitations on third-country firms providing crypto-asset services and the narrow interpretation of the reverse solicitation exemption are key aspects of these guidelines.
Reverse solicitation, where a potential customer approaches a firm for crypto asset services, is allowed as an exemption to the MiCA framework. However, ESMA sees this as a narrow exemption for third-country firms. The regulators, including national competent authorities, will actively protect EU-based investors and MiCA-compliant CASPs from undue incursions by non-EU and non-MiCA compliant entities.
