The Markets in Crypto-Assets Regulation (MiCA) stands as the cornerstone of the European Union’s approach to regulating the cryptocurrency market. Recently, the European Securities and Markets Authority (ESMA) has called for updates to this regulatory framework to enhance its effectiveness and ensure it meets evolving market demands.
On October 16, ESMA released an opinion encouraging the European Commission to revise several components of MiCA. Despite acknowledging legal constraints, ESMA stressed the significance of the policy goals originally set forth in MiCA. The recommendations focus primarily on two regulatory technical standards (RTS): one concerning data disclosure about intentions to provide crypto asset services and the other regarding applications for authorization as a crypto asset service provider.
Specific Amendments Suggested by ESMA
ESMA’s modifications aim to tighten the entry requirements for entities wishing to offer crypto-related services within the EU. Key proposals include:
- Cybersecurity Audits: Mandating that applicants for crypto asset service provider (CASP) licenses submit results from external cybersecurity audits.
- Management Assessment: Requiring a detailed assessment of the good repute of management body members.
- Comprehensive Background Checks: Expanding checks to include the absence of penalties across various legal domains, such as commercial law, insolvency law, financial services, anti-money laundering, counter-terrorist financing, fraud, or professional liability.
These amendments intend to ensure a rigorous assessment process for new CASPs, thereby enhancing the overall resilience of the EU’s crypto assets market and bolstering investor protection.
The opinion issued by ESMA has been communicated not only to the European Commission but also to the European Parliament and the European Council. These bodies have the authority to adopt the proposed RTS with any relevant amendments or to reject them entirely. The legislative process includes a period during which the European Parliament and Council may object to an RTS adopted by the European Commission, spanning three months.
The final deadline for MiCA’s implementation is set for December 30. This upcoming date has prompted discussions and concerns among major industry players, including stablecoin issuer Tether. Critics argue that certain aspects of MiCA could introduce new risks to the local banking infrastructure and stablecoin operations.
Ongoing Dialogues and Stakeholder Feedback
ESMA remains engaged with market participants to address concerns regarding specific titles within MiCA. This ongoing dialogue aims to refine the regulation to better serve the needs of the European cryptocurrency market and its stakeholders.
| Area of Concern | Proposed Amendment |
|---|---|
| Cybersecurity | Mandatory external audits for CASP applicants |
| Management Integrity | Assessment of management’s good repute |
| Legal Compliance | Extended checks for legal and financial compliance |
The ESMA’s call for amendments to the MiCA framework highlights the dynamic and complex nature of cryptocurrency regulation. As the EU strives to create a balanced and secure digital asset market, these proposed changes are crucial for advancing regulatory standards that protect investors while fostering innovation. The coming months will be pivotal in shaping the future of crypto regulation in Europe, with significant implications for both the industry and its consumers.
