ESMA Calls for Opinions on Crypto Regulation Game Changer

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The
European Securities and Markets Authority (ESMA) published two consultation
papers today (Monday) seeking input from stakeholders on guidelines regarding reverse
solicitation and the classification of crypto-assets as financial instruments
under the Markets in Crypto Assets Regulation (MiCA).

ESMA Seeks Input on Regulations
under MiCA

The first
consultation paper covers proposed guidance on the conditions and supervision
of the reverse solicitation exemption under MiCA. Reverse solicitation refers
to situations where a client independently seeks out and initiates services
from a third-country crypto-asset service provider that is not authorized under
MiCA.

“This
exemption should be understood as very narrowly framed and must be regarded as
the exception. A firm cannot use it to bypass MiCA,” ESMA explained.

The second
consultation focuses on formulating clear criteria for determining when a
crypto-asset should be classified as a financial instrument under existing
European financial regulations. Creating consistency between MiCA and other
financial services directives like MiFID II is intended to support the
development of the EU crypto asset market.

“The
proposed guidelines aim at providing NCAs and market participants with
structured but flexible conditions and criteria to determine whether a
crypto-asset can be classified as a financial instrument,” ESMA added.

Interested
groups have until 29 April 2024 to provide feedback on the draft guidelines.
ESMA expects to review responses in Q2 2024 and issue final reports in Q4. The
consultations are part of ESMA’s broader work in establishing regulatory
clarity and standards around crypto-assets in line with MiCA and other EU
financial services legislation.

The
European Securities and Markets Authority (ESMA) published two consultation
papers today (Monday) seeking input from stakeholders on guidelines regarding reverse
solicitation and the classification of crypto-assets as financial instruments
under the Markets in Crypto Assets Regulation (MiCA).

ESMA Seeks Input on Regulations
under MiCA

The first
consultation paper covers proposed guidance on the conditions and supervision
of the reverse solicitation exemption under MiCA. Reverse solicitation refers
to situations where a client independently seeks out and initiates services
from a third-country crypto-asset service provider that is not authorized under
MiCA.

“This
exemption should be understood as very narrowly framed and must be regarded as
the exception. A firm cannot use it to bypass MiCA,” ESMA explained.

The second
consultation focuses on formulating clear criteria for determining when a
crypto-asset should be classified as a financial instrument under existing
European financial regulations. Creating consistency between MiCA and other
financial services directives like MiFID II is intended to support the
development of the EU crypto asset market.

“The
proposed guidelines aim at providing NCAs and market participants with
structured but flexible conditions and criteria to determine whether a
crypto-asset can be classified as a financial instrument,” ESMA added.

Interested
groups have until 29 April 2024 to provide feedback on the draft guidelines.
ESMA expects to review responses in Q2 2024 and issue final reports in Q4. The
consultations are part of ESMA’s broader work in establishing regulatory
clarity and standards around crypto-assets in line with MiCA and other EU
financial services legislation.

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