Key Takeaways
- CASPs will be required to report various details, including transaction date and time, asset identification, pricing information among others
- Trading platforms are mandated to make pre-trade and post-trade data available to the public
The European Securities and Markets Authority (ESMA) has taken another significant step in the regulation of crypto assets by launching its second consultation paper on the Markets in Crypto Assets Regulation (MiCA).
MiCA, which was approved in April, aims to establish a comprehensive regulatory framework for crypto assets within the European Union (EU). This latest consultation, open until December 14, focuses on critical aspects, including trade transparency rules for crypto venues.
The document released by ESMA invites input from stakeholders on five key areas of MiCA:
- Sustainability Indicators: ESMA seeks to incorporate sustainability indicators for distributed ledger technology, including metrics related to energy consumption, greenhouse gas emissions, waste production, and the environmental impact of blockchain network nodes.
- Disclosures of Inside Information: The consultation addresses the disclosure of inside information, which is crucial for market transparency.
- Technical Requirements for White Papers: ESMA is soliciting feedback on the technical specifications for white papers accompanying crypto asset offerings.
- Trade Transparency Measures: The proposed rules require trading platforms to publicly disclose bid and ask prices, as well as the depth of trading interests on a pre-trade basis. Post-trade transparency entails the real-time publication of price, volume, transaction time, and other relevant details for crypto assets traded on platforms.
- Record-Keeping for Crypto-Asset Service Providers (CASPs): ESMA outlines requirements for CASPs to maintain transaction records.
One notable aspect of the proposal is the obligation for trading platforms to make pre-trade and post-trade data available to the public, enhancing transparency in the crypto market. ESMA also emphasizes the need for sustainability considerations, highlighting metrics related to environmental impact in line with the EU’s commitment to sustainability.
Regarding post-trade transparency, CASPs will be required to report various details, including transaction date and time, asset identification, pricing information, quantity, execution venue, and transaction ID. Additionally, CASPs may store transaction data in their preferred format, with the flexibility to convert it into a specified format upon request from authorities.
ESMA faces a deadline of June 30, 2024, to submit its technical standards to the European Commission. To gather comprehensive feedback, the regulator plans to release a third consultation package in Q1 2024.
The MiCA regulation is set to take effect in stages, with the majority of its provisions commencing on December 30, 2024. This comprehensive regulatory framework aims to provide legal clarity for businesses operating in the crypto space and attract more investment to the EU. While the EU crypto industry has generally welcomed MiCA, noncompliance with its standards could result in substantial penalties, potentially reaching up to 12.5% of annual turnover.
