Key Insights
- ESMA warns of risks from global crypto firms routing EU orders to offshore venues, potentially undermining consumer protection and fair competition.
- The regulator calls for increased vigilance by national authorities during the MiCA authorization process, recommending thorough assessment of global firms’ structures.
- ESMA’s opinion outlines specific requirements for evaluation, including best execution, conflict management, and client asset custody, to ensure MiCA compliance.
BRUSSELS (MarketsXplora) -In a move to bolster regulatory oversight of the burgeoning crypto market, the European Securities and Markets Authority (ESMA) has issued a crucial opinion addressing potential risks posed by global cryptocurrency firms seeking authorization under the Markets in Crypto Assets (MiCA) Regulation in the European Union.
The EU’s financial markets regulator has raised concerns about complex corporate structures employed by some global crypto entities, where only a portion of their activities—specifically crypto brokerage—falls under MiCA’s purview, while substantial group operations, including intra-group execution venues, remain beyond EU regulatory reach.
ESMA highlighted the dangers associated with this arrangement, noting that EU-authorized brokers could effectively route orders to offshore intra-group execution venues. This practice, the authority warns, may significantly undermine consumer protection measures and create an uneven playing field with EU-authorized execution venues.
In response to these identified risks, ESMA has called for heightened vigilance among National Competent Authorities (NCAs) during the authorization process. The regulator emphasized the need for thorough assessment of global firms’ business structures to ensure compliance with MiCA obligations and to safeguard consumer interests and market integrity.
The opinion outlines specific requirements that should be evaluated on a case-by-case basis. These include best execution practices, management of conflicts of interest, the obligation to act honestly, fairly, and professionally in clients’ best interests, and responsibilities related to the custody and administration of crypto-assets on behalf of clients.
Recognizing the pivotal role of crypto-asset execution venues in the ecosystem, ESMA stressed the comprehensive rules set out in MiCA regarding the operation of crypto-asset trading platforms. This opinion forms part of broader efforts by ESMA and NCAs to ensure effective implementation of MiCA and promote convergent supervisory practices across the EU.
The full text of ESMA’s opinion, aimed at supporting the consistent application of MiCA, is available for download from the authority’s official website.