The European Securities and Markets Authority (ESMA), the top regulator of the European Union’s financial markets, has opened a feedback window, on guideline under MiCA regulation.

The Markets in Crypto Assets Regulation (MiCA), which is due to take effect this year, is EU’s comprehensive crypto law. The legislation promises legal certainty, compliance challenges and global implications.

On Monday, the regulator announced the launch of two consultation papers – reverse solicitation and classification of cryptos as financial instruments.

ESMA is seeking inputs from stakeholders on these MiCA guidelines, which aims to create a structured yet flexible crypto laws. “ESMA invites comments from stakeholders by 29 April 2024,” the regulator wrote.

“All interested stakeholders are invited to respond to this consultation paper. In particular, ESMA invites crypto-asset service providers and financial entities dealing with crypto-assets as well as all stakeholders that have an interest in crypto assets.”

The consultation papers reflect ESMA’s broader work in establishing regulatory clarity around cryptocurrencies in line with the MiCA regulations.

Responding to Consultation Papers

ESMA’s first consultation paper aims to receive more guidance on the conditions of application of the reverse solicitation exemption. It also seeks inputs on the supervision practices that national competent authorities may take to prevent its circumvention.

Article 61 of MiCA, often referred to as the reverse solicitation exemption, is actually a restriction. It prohibits third-country firms to solicit clients established or situated in the EU.

The proposal seeks public opinion on potential loopholes that could be exploited by third-country firms to circumvent MiCA authorisation requirements.

Furthermore, the supervisory practices aims to detect circumvention of the reverse solicitation exemption includes monitoring EU marketing activities, consumer surveys, among others.

ESMA sought suggestions on whether market players agree to the proposed supervision practices effective with respect to detecting undue solicitations.

The second consultation paper included questions on the scope of the conditions for the qualification of crypto-assets as financial instruments.

“This will reduce misunderstandings and misinterpretations of policy intent and support a harmonised approach throughout the Union,” the regulator noted.

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