On 29 January 2024, the European Securities and Markets Authority (ESMA) published two consultation papers relating to draft guidelines proposed to be issued under Regulation 2023/1114 on markets in crypto-assets (MiCA).
In summary the two papers provide the following:
Draft guidelines on reverse solicitation under MiCA
As background, MiCA restricts the provision of crypto-assets services in the EU by third-country firms, except when such crypto-asset services are initiated at the client's exclusive discretion (the Reverse Solicitation Exemption). Through the new draft guidelines, ESMA emphasises the narrow scope of this exemption to prevent circumvention of MiCA regulations.
Key points:
- ESMA's consultation paper seeks input on MiCA's proper implementation, focussing on mandates to be developed by December 2024.
- The proposed guidelines aim to clarify when third-country firms can offer services to EU-based clients under the Reverse Solicitation Exemption.
- The guidelines are largely based on similar guidance applicable to investment firms under MiFID II, underscoring the limited and tightly regulated nature of the exemption to prevent misuse.
- ESMA provides broad interpretations of solicitation concepts and outline conditions for third-country firms offering services matching clients' original requests.
- Notably, the guidelines emphasise that the reverse solicitation exemption applies solely to third-country firms, and EU-based entities cannot use it to evade passport notification requirements under MiCA.
ESMA encourages stakeholders to provide feedback, by 29 April 2024, and is aiming to publish final guidelines by the end of 2024.
The reverse solicitation consultation paper can be accessed here.
Draft guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments
The draft guidelines aim at delineating between the notion of a "crypto-asset" under MiCA and the notion of a "financial instrument" under MiFID II.
Currently, with varied approaches to transposing MiFID across EU Member States, there is no unified definition of "financial instrument" under MiFID. This creates the potential for issues in the interplay between MiFID II and the classification of crypto-assets under MiCA, once the relevant MiCA provisions enter into force on 31 December 2024.
The consultation paper addresses various often-debated topics such as the status of tokenised securities and debt, crypto-derivatives, NFTs and others.
ESMA encourages stakeholders to provide feedback, by 29 April 2024, and is aiming to publish final guidelines by the end of 2024.
The financial instruments consultation paper can be accessed here.
Our overview general guide on MiCA can be found here.
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