ESMA consults on reverse solicitation and classification of crypto assets as financial instruments under MiCA

The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, today publishes two Consultations Papers on guidelines under Markets in Crypto Assets Regulation (MiCA), one on reverse solicitation and one on the classification of crypto-assets as financial instruments.

ESMA invites comments from stakeholders by 29 April 2024.

Consultation paper on guidelines on reverse solicitation

In this consultation, ESMA is seeking input on proposed guidance relating to the conditions of application of the reverse solicitation exemption and the supervision practices that National Competent Authorities (NCAs) may take to prevent its circumvention.

The proposed guidance confirms ESMA’s previous message that the provision of crypto-asset services by a third-country firm is limited under MiCA to cases where the client is the exclusive initiator of the service. This exemption should be understood as very narrowly framed and must be regarded as the exception. A firm cannot use it to bypass MiCA.

Consultation paper on guidelines on conditions and criteria for the classification of crypto-assets as financial instruments

In this consultation paper, ESMA is seeking input on establishing clear conditions and criteria for the qualification of crypto-assets as financial instruments. This initiative, which follow on from previous work by ESMA, is aimed at bridging the MiCA regulation and the Markets in Financial Instruments Directive II (MiFID II) and ensuring consistency across the EU.

The proposed guidelines aim at providing NCAs and market participants with structured but flexible conditions and criteria to determine whether a crypto-asset can be classified as a financial instrument.

To do so, the draft strikes a balance between providing guidance and avoiding establishing a one-size-fits-all approach. Once finalised, these guidelines will provide much-needed clarity and contribute to the global standards in crypto-asset regulation.

Next Steps

The consultation closes on 29 of April 2024. ESMA will consider the feedback it receives to the consultation in Q2 2024 and expects to publish a final report in Q4 2024.