ESMA publishes final guidelines as MiCA looms

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The European Securities and Markets Authority (ESMA) has published its final guidance just days before the Markets in Crypto Assets (MiCA) framework takes effect.

ESMA has been scrambling to offer policy guidance to EU member states this year as the region readies for the full implementation of MiCA on December 30. Throughout the year, the Authority has collected feedback from national competent authorities, VASPs and other industry stakeholders and responded through guidance policies. 

It has now published its last one before MiCA takes effect. Commenting on the latest guidelines, ESMA Chair Verena Ross noted that implementing the regional framework “marks a significant step towards having a regulatory framework for the crypto market in place.”

However, she noted that MiCA is limited in its scope as it concerns internal ‘crypto’ market turmoil and called on investors to do thorough research before investing.

“Nevertheless, it is crucial to recognise that the new regime would not suffice to eliminate the inherent uncertainty and volatility in the crypto-assets market, and investors should fully understand the risks before engaging in this space,” Ross added.

Among the areas the new guidelines focus on are market abuse and reverse solicitation. For the former, ESMA specified procedures to detect and prevent abuse, including a reporting template and coordination procedures by national authorities to curb cross-border abuse. With the latter, the Authority affirmed that its previous policies on reverse solicitation remain as narrow as can be and must not be used to circumvent MiCA guidelines.

ESMA first addressed reverse solicitation in a January paper. It defined it as any situation where the client initiates the provision of a digital asset investment service. Under existing capital markets laws, if an EU resident approaches a non-EU firm at their own volition, this firm wouldn’t need to be authorized by EU authorities. In ‘crypto,’ ESMA says that the VASP bears the burden of proof that it didn’t solicit the client at all.

The final ESMA guidelines also demand that VASPs offer proper advice and recommendations to clients, specify policies and procedures for VASPs offering digital asset transfer services, and address digital assets used as financial instruments.

Ross pledged ESMA’s support to national competent authorities beyond the official guidelines, stating, “…we will continue to provide guidance and work with all NCAs to ensure the smooth implementation of MiCA and to support a level playing field through supervisory convergence actions.” 

The first batch of MiCA guidelines took effect mid-year, mainly targeting stablecoin issuance. One of the demands was for issuers to obtain an EU license, which Circle was the first to acquire, and it forced some, like Tether, to discontinue some products.

The second batch takes effect in a week, yet most competent authorities are ill-prepared to enforce it. In some countries, such as Belgium, Portugal and Poland, the authorities still wait for legislators to pass laws that give them jurisdiction under MiCA. 

Even countries with advanced digital asset regulation frameworks, like Germany, are struggling with MiCA. BaFIN, the de facto ‘crypto’ tsar, must await new legislation to align its mandate with MiCA.

France seizes unregistered digital asset ATMs

French authorities have seized multiple digital asset ATMs whose operators had not obtained the required licenses in a new crackdown this week.

The French financial watchdog, the Autorité des Marchés Financiers (AMF), led the operation, which was conducted on December 17. AMF worked with the Paris inter-regional jurisdiction (JIRS) in the crackdown, following up on an earlier crackdown on June 13.

The two authorities targeted any unregistered ATM, seizing the equipment and shutting down their operations. In France, digital asset ATM operators are required to register and obtain a license from the AMF. Violations could land operators in prison for a maximum of two years and fines of up to €30,000 ($31,000).

The crackdown came just weeks before MiCA takes effect at the end of the year. The new framework imposes more rigorous requirements on digital asset firms, and many are now scrambling to comply before the deadline. 

The rush isn’t limited to the VASPs, with national authorities also working to be ready for implementation. 

In France, the AMF requires all VASPs to have a license by December 30. Those who received the licenses under the previous PACTE (Action Plan for Business Growth and Transformation) regime will be allowed to operate until July 1, 2026, before being required to transition to the MiCA license. The AMF revealed earlier this year that over 100 firms fall into this category. However, such firms can’t operate under the European passport framework in other countries until they obtain the MiCA license.

Beyond Europe, digital asset ATMs remain a concern for authorities. Australia recently launched a new task force targeting these ATMs, which authorities claimed have been targeted by criminals. 

Watch: Reggie Middleton on DeFi, booms/busts & crypto regulation