The European Securities and Markets Authority (ESMA) has taken significant steps towards regulating the crypto-asset industry by publishing its first final report and launching a third consultation package under the Markets in Crypto-Assets Regulation (MiCA).

ESMA Finalizes First Rules for Crypto-Asset Service Providers

In its first final report, ESMA has outlined proposals on the information required for the authorization of crypto-asset service providers (CASPs), the notification process for financial entities intending to provide crypto-asset services, the assessment of the intended acquisition of qualifying holdings in CASPs, and how CASPs should address complaints.

The report aims to promote fair competition between CASPs and create a safer environment for investors across the European Union.

ESMA's Securities and Markets Stakeholder Group has advocated for a "level playing field" where financial institutions providing crypto-asset services are subject to the same oversight and regulation as intermediaries offering similar financial services.

The group has endorsed a "two-track approach" involving notification requirements for regulated financial entities that largely align with the authorization requirements for other entities.

“By striking a balance between investor protection and fostering innovation, regulators are rightly aiming to promote trust in the crypto ecosystem and ensure its sustainable growth in the long term,” Kok Kee Chong, the CEO of AsiaNext, commented on the final report.

Third Consultation Package Seeks Input on MiCA

ESMA's third consultation package seeks input from stakeholders on four sets of proposed rules and guidelines.

These cover detecting and reporting suspected market abuse in crypto-assets, policies and procedures for crypto-asset transfer services, suitability requirements for certain crypto-asset services, and ICT operational resilience for entities under MiCA. Stakeholders have until June 25, 2024, to provide feedback.

“With crypto markets known for their high volatility, a sound risk framework helps an exchange minimise the impact of market uncertainties for institutional traders, Aligning with wider financial industry best practices, it is key for exchanges to engage in proactive risk management,” Kok Kee Chong added.

The European Banking Authority (EBA) has also been consulting on the measures under the MiCA regulation since its completion in 2023. Earlier in the month, EBA and ESMA released a draft of regulations for issuers of stablecoins.

As the crypto ecosystem has experienced concerning developments, such as the collapse of crypto-asset service providers, ESMA has incorporated these lessons into the regulatory framework.