The European Securities and Markets Authority has submitted its response to the European Commission's public consultation on the review of the Markets in Crypto-Assets Regulation, proposing measures to enhance investor protection, streamline rules, and oversee emerging activities such as decentralised finance.
Investor protection and marketing safeguards
In its response, the European Securities and Markets Authority recommended safeguards to address risks facing investors in areas not fully covered by the current framework. The regulator advocated for stricter rules on crypto-asset marketing, particularly regarding promotions led by influencers and third parties.
To ensure greater cost transparency, ESMA recommended introducing disclosure obligations for staking, lending, and borrowing services. These requirements would mandate clear initial information regarding costs, risks, potential rewards, collateral arrangements, and possible financial losses.
Supervisory powers and stablecoin rules
ESMA called for expanded supervisory capabilities across the European Union to combat unauthorised services and fraud. The proposals include mechanisms to detect, block, and deactivate fraudulent websites, as well as powers to freeze crypto assets when market abuse or terrorist financing is suspected.
The authority also proposed enhanced powers to address third-country firms that target EU investors without authorisation under MiCA. To reduce regulatory arbitrage, ESMA suggested explicit rules preventing regulated crypto firms from facilitating services linked to stablecoins that fail to meet MiCA standards.
Decentralised finance and token classification
Recognising the growth of decentralised finance, ESMA recommended establishing distinct criteria to identify genuinely decentralised activities. The regulator suggested creating a new regulated crypto-asset service category for entities providing user access to DeFi protocols.
To maintain consistent supervision throughout the EU, ESMA proposed standard rules for classifying assets, including hybrid tokens. Under this arrangement, ESMA would gain the authority to issue binding opinions on token classification.
Administrative streamlining and future markets
In line with EU efforts to reduce regulatory administrative burdens, ESMA outlined options to simplify crypto-asset white-paper notification processes, eliminate duplicate authorisation requirements for certain regulated entities, and improve consistency in prudential rules.
Looking beyond immediate revisions, ESMA highlighted the need for a comprehensive framework covering tokenised securities and on-chain settlement to support an integrated European tokenised capital market.
Frequently Asked Questions
What measures did ESMA propose for crypto marketing?
ESMA proposed stricter marketing rules for crypto-assets, specifically focusing on promotions carried out by influencers and third parties.
How does ESMA recommend handling decentralised finance?
ESMA recommended defining clear criteria for genuinely decentralised activities and establishing a new regulated crypto asset service for firms providing access to DeFi protocols.
