The European Securities and Markets Authority (ESMA) has just published two consultation papers on two important aspects under the Markets in Crypto Assets Regulation (MiCA), namely:

• Draft Guidelines on Reverse Solicitation under MICA; and
• Draft Guidelines on the Conditions and Criteria for the Qualification of Crypto-Assets as Financial Instruments.

Consultation Paper on Reverse Solicitation

This consultation paper confirms ESMA’s previous stance on reverse solicitation.

A (non-EU) third-country firm will not be able to solicit EU-based clients unless an appropriate licence is sought from a European Regulator. There is only one exception – when the crypt-asset service is requested at the “exclusive initiative” of the EU-based client (i.e. the so-called reverse solicitation exemption). ESMA stresses that this exemption should be construed very narrowly and cannot be exploited to circumvent MiCA.

Annex II of ESMA’s draft guidelines focuses on the means of solicitation, the significance of “exclusive initiate of the client”, the circumstances when a crypto-asset or a crypto-asset service is of the same type as another one, and supervision practices by European Regulators.

Consultation Paper on the Qualification of Crypto-Assets as Financial Instruments

This consultation paper seeks to provide greater clarity on the delineation between MiCA and the Markets in Financial Instruments Directive (MiFID II).

The objective is to ensure consistent approaches across EU Members States regarding the crypto-assets that should be considered as financial instruments under Annex I, Section C of MiFID II. The rights attached to certain crypt-assets may raise specific challenges on the applicable regulatory framework (i.e. MiCA vs MiFID II vs other possible EU legislation). ESMA proposes a technology-neutral approach – based on certain conditions/ criteria – that seeks to avoid a one-size fits all methodology.

Annex II of ESMA’s draft guidelines differentiate between transferable securities, money market instruments, collective investment schemes, derivative instruments, and emission allowances. Annex II also comments on certain features of utility tokens, NFTs and hybrid tokens.

Stakeholders have been requested to provide feedback on both consultation papers by 29 April 2024.

Prior to these two consultation papers, ESMA published two (separate) consultation packages under MiCA in July 2023 and October 2023.

Authors: Mark Caruana Scicluna, James Debono