Corporations that market cryptocurrency alongside traditional securities canย potentially mislead consumers about access to fair advice and compensation, the European Securities and Markets Authority worries.
Investment corporations in the European Union that offer cryptocurrency alongside more traditional products mayย be misleading their consumers into a false sense ofย safety, the European Securities and Markets Authority (ESMA) stated in a Thursday statement.
The EU agency stated itโs worried that corporations may use a seal of regulatory approval they have to offer traditional finance (TradFi) stocks or funds to make customers believe theyโll have access to sound financial advice or compensation schemes in the event of cryptocurrency mishaps.
EU regulations known as the Markets in Financial Instruments Directive (MiFID) secure financing intermediaries encourage only appropriate financial products to clients โ but doย not always apply to more exotic financing opportunities like gold, real estate or non-transferable loans.
The EUโs Markets in Cryptocurrency Assets regulation (MiCA) is set to attract MiFID-style regulations to the sector, but the regime will only take effect in around 18 months. Meanwhile,ย ESMA, a Paris-based agency that groups and coordinates national regulatoryย authorities, is worried some corporations are encouraging and exploiting the ambiguity.
โESMA recommends that financing corporations take all necessary measures to secure that clients are fully aware of the regulatory status of the product/service they are receiving and clearly disclose to clients when regulatory protections doย not apply,โ ESMA stated, adding that regulatory approval shouldnโt be used as a promotional tool.
ESMA has previously warned people cryptocurrency can be risky, while an October paper highlighted novel threats such as hacks and consensus manipulation. The agency is likewise set to consult shortly on detailed secondary laws that will put MiCA into effect.
Sandali Handagama.
