ESMA Proposes Tighter Rules for Crypto Firms Outside the EU
The EU’s financial markets regulator, the European Securities and Markets Authority (ESMA), has published consultation papers outlining stricter rules for crypto firms based outside the EU. These rules aim to ensure fair competition and limit the ability of non-EU firms to directly serve customers within the bloc.
First Set of Guidance: Reverse Solicitation Exemption
The first set of proposed guidelines focuses on the reverse solicitation exemption and the supervision practices that national competent authorities (NCAs) can use to prevent its misuse. Under the new rules, non-EU crypto firms can only provide services within the EU if the client contacts the firm at their own initiative, specifically requesting the service. Third-country firms are not permitted to solicit clients within the EU.
Recent Policy Changes and EU Presence
While reverse solicitation is recognized in EU financial laws, recent policy changes tighten these rules, pressuring foreign firms to establish a presence within the EU to continue serving customers in the bloc.
Second Set of Guidelines: Crypto Asset Classification
ESMA has also proposed guidelines to define when a crypto asset qualifies as a “financial instrument” under the Markets in Financial Instruments Directive (MiFID) rules. This aims to create consistency between MiCA and MiFID II regulations.
Submitting Feedback and Final Report
Stakeholders have until April 29 to submit comments on ESMA’s proposals. The authority will review the feedback and plans to release a final report in Q4 of the year. ESMA and national competent authorities will use their powers to actively protect EU investors and MiCA-compliant crypto firms from non-EU entities that do not comply with MiCA regulations.
Hot Take: The EU Strengthens Regulation on Non-EU Crypto Firms
The European Securities and Markets Authority (ESMA) has taken a decisive step in proposing stricter rules for crypto firms outside the EU. By limiting the ability of non-EU firms to directly serve customers within the bloc, the EU aims to ensure fair competition. These proposed rules focus on the reverse solicitation exemption and the classification of crypto assets as “financial instruments.” With tightened regulations, foreign firms may need to establish an EU presence to continue operating within the EU market. Stakeholders have the opportunity to provide feedback, and ESMA plans to release a final report later this year. Ultimately, the EU seeks to protect its investors and MiCA-compliant crypto firms from non-EU entities that do not conform to regulations.
By
By
By
By