The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator, has proposed stricter rules for crypto firms based outside the EU, limiting their ability to directly serve customers within the bloc to ensure fair competition.

ESMA Proposes Stricter Rules for Non-EU Crypto Firms

The European Securities and Markets Authority (ESMA), responsible for regulating and supervising EU financial markets, published consultation papers on two sets of proposed guidelines under the Markets in Crypto-Assets Regulation (MiCA) earlier this week.

The first set of guidance concerns the rules for the reverse solicitation exemption and the supervision practices national competent authorities (NCAs) may take to prevent its circumvention. To ensure a level playing field for companies within the EU, foreign crypto assets service providers (CASPs) will only be able to directly serve customers within the bloc under very limited conditions. “There is only one exemption, if the client at its own, exclusive initiative contacted the firm and requested the service, the third-country firm may provide it,” ESMA clarified, emphasizing:

Third-country firms may not solicit clients in the Union as they are not authorised to provide CASP services in the Union.

While EU financial laws recognize “reverse solicitation,” where customers reach out directly, recent policy changes tighten up these rules, pressuring foreign firms to establish an EU presence.

ESMA also proposed another set of guidelines to define when a crypto asset qualifies as a “financial instrument” under Markets in Financial Instruments Directive (MiFID) rules, bridging the gap between MiCA and MiFID II for EU-wide consistency.

Stakeholders have until April 29 to submit comments on ESMA’s two consultations. The authority will consider the feedback throughout Q2 and expects to release a final report in Q4. The regulator said:

ESMA, and national competent authorities, through their supervisory and enforcement powers, will take all necessary measures to actively protect European Union (EU)-based investors and MiCA-compliant crypto-asset service providers from undue incursions by non-EU and non-MiCA compliant entities.

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