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Adapting to MiCA: ESMA’s recent publications for the Crypto Industry

Introduction

The European Securities and Markets Authority (ESMA) has kept up the momentum ahead of the implementation of the Markets in Crypto-Assets Regulation (MiCA) this year.

On 25 March 2024, the EU watchdog published:

  • a final report on the first package of measures under MiCA;

  • a final report on the cooperation between various authorities in relation to MiCA; and

  • a consultation document on the third package of measures under MiCA.

    • MiCA will establish uniform rules across the European Union (EU) for crypto-assets. ESMA has been busy finalising several aspects under MiCA, which will be implemented in two phases. The provisions of MiCA will generally apply from 30 December 2024, except Titles III (Asset-Referenced Tokens) and IV (E-Money Tokens) which will apply from 30 June 2024.

    ESMA issues a Final Report for the First Package of Measures under MiCA

    MiCA requires ESMA to prepare draft regulatory technical standards (RTS) and implementing technical standards (ITS) on a variety of topics. In July 2023, ESMA issued its first consultation package with a raft of measures – under 5 RTSs and 2 ITSs – in respect of the following:

  • the notification by certain financial entities of their intention to provide crypto-asset services;

  • the authorisation of crypto-asset service providers (CASPs);

  • complaints handling by CASPs;

  • the identification, prevention, management and disclosure of conflicts of interest; and

  • the proposed acquisition of a qualifying holding in a CASP.

    • ESMA’s final report covers the topics listed in points 1, 2, 3 and 5 above. The final report on the RTS for conflicts of interest will be published by ESMA at a later stage.

    In most cases, the respondents were broadly supportive of ESMA’s proposals. On this basis, ESMA did not introduced substantial changes in its final report – particularly in relation to the notification and authorisation of crypto-asset services. The European Commission, the executive arm of the EU, must decide whether to adopt ESMA’s final report within three months.

    ESMA issues a Final Report for the Cooperation between Competent Authorities under MiCA

    ESMA also issued a final report specifying the requirements for cooperation, exchange of information and notification between competent authorities, European Supervisory Authorities, and third-country authorities under MiCA.

    ESMA will now submit the RTSs and ITSs to the European Commission for adoption. ESMA did not consult publicly on these matters since the standards are not addressed to market participants.

    Third Consultation Package under MiCA

    ESMA’s third consultation package seeks public scrutiny on four new topics, namely:

  • detection and reporting of suspected market abuse in crypto-assets (RTS);

  • suitability requirements for certain crypto-asset services and the format of the periodic statement for portfolio management (Guidelines);

  • policies and procedures, including the rights of clients, for crypto-asset transfer services (Guidelines); and

  • ICT operational resilience for certain entities under MiCA (Guidelines).

    • Stakeholders are encouraged to provide their feedback by 25 June 2024.

    Author: James Debono, Mark Caruana Scicluna

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