EU’s Financial Watchdog Demands Clarity from Service Providers
- The EU plans to enforce MiCA between mid-2024 and early 2025.
- Crypto companies are moving to Europe following the approval of MiCA.
- MiCA sets a uniform standard for all crypto companies operating in Europe.
The European Securities and Markets Authority (ESMA), another EU watchdog, has raised awareness about possible dangers in the crypto market. ESMA and the National Competent Authorities (NCAs), in a recent statement, urged crypto companies to clarify their clients on the regulatory status of their products and services.
While Europe is set to have a comprehensive policy for cryptocurrencies, ESMA reminded crypto companies that crypto remains unregulated in most jurisdictions.
Specifically on crypto assets, while the Markets in Crypto-Assets Regulation (MiCA) is close to adoption, crypto assets offered by investment firms will continue to be unregulated in most jurisdictions until MiCA applies.
The EU watchdog also noted that unregulated products and service offerings pose serious risks to investors. ESMA believes crypto investors could be “misled as to the level of protection they get.”
The regulator advised investment businesses to inform their clients where legal safeguards do not apply to their goods or services to mitigate these risks. ESMA also urged investment companies to prioritize the security of their clients by “acting fairly, professionally, and providing clear and unambiguous communication.”
Crypto businesses have expressed greater confidence in operating in Europe since the approval of MiCA, which establishes a broad framework for crypto operations in Europe. MiCA sets the standard for issuing stablecoins and demands increased transparency from crypto service providers. In addition, MiCA enforces strict security demands on crypto firms, which include implementing anti-money laundering (AML) policies.