Prepared by Fabrizio Cascinelli, Mario Zanin, Francesco Della Scala
The European Securities and Markets Authority (ESMA) put out for consultation two sets of Guidelines under the so-called Market in Crypto-Assets Regulation (MiCA Regulation) i.e., Regulation (EU) 2023/1114 of the European Parliament and of the Council of May 31, 2023, and published in the Official Journal of the European Union on June 9, 2023.
The MiCA Regulation, it’s useful to remember, is intended to address the fragmentation of the European legal framework applicable to crypto-assets by outlining a harmonized European-wide framework for admission to trading as well as for related crypto-asset service providers.
With reference to timing, the MiCA Regulation will be applicable in its entirety as of 30 December 2024; however, the requirements for asset-referenced tokens and e-money tokens will be applicable as of 30 June 2024.
For the full implementation and applicability of the rules set out by MiCA, EBA and ESMA are required to develop (in certain cases jointly) Regulatory Technical Standards (RTS), Implementing Technical Standards (ITS) and guidelines. Considering the number of technical standards to be developed, ESMA has, at the time, announced the division of the works into three separate consultation packages.
The first consultation of ESMA (Consultation Package 1) – covering 5 sets of RTS and 2 sets of ITS related to Crypto-Asset Service Providers (so-called CASPs) was held between July and September 2023.
Subsequently, between October and December 2023, ESMA put out for consultation the second set of technical standards (Consultation Package 2) comprising 6 sets of RTS and 2 sets of ITS.
With reference to the above technical standards, final reports prepared by ESMA based on the feedback received are awaited; the Authority will then submit the draft technical standards to the European Commission for approval by June 30, 2024.
The consultations under consideration concern, instead, two sets of Guidelines falling under the so-called “Consultation Package 3” relating to the remaining mandates under the MiCA Regulations expiring on December 30, 2024.
The first set of Guidelines submitted for public consultation concerns the so-called “reverse solicitation,” referred to in Article 61 “Provision of crypto-asset services at the exclusive initiative of the client” of the MiCA; in the document, ESMA confirms what it has previously communicated in its October 2023 message “ESMA clarifies timeline for MiCA and encourages market participants and NCAs to start preparing for the transition” namely that the provision of crypto-asset services or activities by a third-country firm is strictly limited to cases where such service is initiated at the sole initiative of a client.
In this context, already known in the field of financial regulation, the Guidelines are intended to provide guidance on situations in which a third-country firm is deemed to be soliciting clients established or located in the EU and supervisory practices to detect and prevent circumvention of what is required by the MiCA Regulation.
The second set of Guidelines, developed under Article 2(5) of the MiCA Regulation, addresses the conditions and criteria for the qualification of crypto-assets as financial instruments as defined by the Markets in Financial Instruments Directive (MiFID II). These Guidelines will provide clarity for National Competent Authorities and market participants as to which crypto-assets should be considered financial instruments and therefore be subject to the sector-specific regulatory frameworks and specifically MiFID II.
In this regard, it is generally recalled that the Regulation defines “crypto-asset” as “a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology” and outlines three typologies of crypto-assets: asset-referenced tokens, e-money tokens and utility tokens, establishing specific rules for each category.
As a result, the guidelines will provide guidance to relevant national authorities and market participants to ensure that it is clear which crypto-assets should be considered financial instruments and therefore be subject to sectoral regulatory frameworks and MiFID II in particular.
ESMA invites comments from stakeholders by 29 April 2024.
ESMA has informed that it will develop the final versions of the two sets of Guidelines by the end of 2024, as required by the MiCA Regulation itself.