The European Securities and Markets Authority (ESMA) has released two consultation papers.
The European Securities and Markets Authority (ESMA) has released two consultation papers seeking input on its mandate to create standards and guidelines for the implementation of the Markets in Crypto-Assets (MiCA) regulation. The papers address the qualification of crypto assets as financial instruments and reverse solicitation.
ESMA is seeking comments on the conditions and criteria for the qualification of crypto assets as financial instruments. A crypto asset that qualifies as a financial instrument will be subject to MiFID II regulation rather than MiCA. MiCA requires ESMA to delineate between MiCA and MiFID requirements for financial instruments to create a consistent approach at the national level by the end of the year.
ESMA is also seeking consultation on reverse solicitation, which refers to a potential customer approaching a firm for crypto asset services. MiCA allows third-country crypto asset firms to service European Union clients through this mechanism. ESMA emphasizes that reverse solicitation is a narrow exemption and that it will take measures to protect EU-based investors and MiCA-compliant crypto asset service providers from non-EU and non-MiCA compliant entities.
ESMA proposed guidelines for national regulators based on the Markets in Financial Instruments Directive 2014 (MiFID II), which contains similar provisions. Follow-up services by third-country crypto asset service providers are also subject to the guidelines.
ESMA notes the lack of a general definition of financial instruments in MiFID II and the resulting lack of harmonization at the national level. The guidelines aim to promote convergent practices in this context. To be considered a financial instrument, a crypto asset would have to be defined as a transferable security, a money-market instrument, a unit of collective investment undertaking, a derivative contract, or an emission allowance. Comments are due by April 19, 2024.
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