The European Securities and Markets Authority (ESMA) has taken a significant step towards the implementation of the Markets in Crypto-Assets (MiCA) regulation by releasing two consultation papers on January 29. The papers focus on crucial aspects, including reverse solicitation and the classification of crypto assets as financial instruments.
ESMA’s Crypto Guidelines
Reverse solicitation, as defined by European regulators, refers to the practice of potential customers approaching a firm for crypto asset services. Under the MiCA framework, there is an exemption that allows third-country crypto asset firms to serve European Union clients through this mechanism alone.
The first consultation paper delves into the draft guidelines on reverse solicitation under MiCA. Published in the Official Journal of the EU on June 9, 2023, MiCA empowers ESMA to develop technical standards and guidelines specifying certain provisions. This latest consultation follows two previous packages released by ESMA in July 2023 and October 2023.
ESMA emphasizes that the provision of crypto-asset services or activities by a third-country firm is strictly limited under MiCA to cases where such services are initiated at the exclusive initiative of a client, known as the “reverse solicitation” exemption. This exemption is considered narrowly framed and is an exception not to be exploited to circumvent MiCA regulations.
To provide additional clarity on the conditions for applying the reverse solicitation exemption and the supervision practices that national competent authorities may adopt to prevent circumvention, ESMA is contemplating the adoption of the guidelines attached to the consultation paper.
ESMA has published a Consultation Paper (CP) to gather views, comments, and opinions from stakeholders and market participants regarding the appropriate implementation of MiCA, particularly concerning certain MiCA mandates set to be developed by December 2024. Respondents are encouraged to provide relevant information supporting their arguments or proposals.
The consultation process will be an important step in shaping the final guidelines. ESMA will review the feedback received and expects to publish a final report no later than the end of 2024. The regulatory body is committed to actively protecting EU-based investors and MiCA-compliant crypto-asset service providers from potential incursions by non-EU and non-MiCA-compliant entities through supervisory and enforcement measures.
Stakeholders and industry participants are urged to engage in the consultation process to contribute to developing robust guidelines that will foster a secure and compliant crypto-asset market within the European Union.
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