EU agency says crypto firms can sometimes serve non-European users

EU-based crypto firms can serve non-EU customers in some cases, the European Securities and Markets Authority (ESMA) said on Jan. 29.

ESMA wrote in a statement:

“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.”

ESMA otherwise said that this allowance, referred to as reverse solicitation exemption, is narrowly framed and is strictly an exemption.

It emphasized that companies cannot use the exemption to bypass Markets in Crypto Assets Regulation (MiCA) rules. MiCA came into force in June 2023 and set out many new rules for cryptocurrency industry members in the EU.

ESMA also published a consultation paper concerning the exemption today. Though that guidance has not been finalized, the agency’s statement above implies that the rule is broadly effective at present based on its earlier messages. Comments on the paper instead concern specific applications of the rule and supervision practices that authorities can use to prevent violations.

Other rules concern classification of crypto-assets

ESMA added that it has published a second consultation paper concerning guidelines that define the classification of crypto-assets as financial instruments.

The agency said that this will bridge the EU’s recent MiCA rules with the earlier Markets in Financial Instruments Directive II (MiFID II). Whereas MiCA provides a framework for regulating cryptocurrency, MiFID II provides a framework for regulating traditional financial instruments including securities.

Those rules could have a light touch, based on statements from the agency. ESMA said that the proposed guidelines aim to find a middle ground between creating guidance and “avoiding establishing a one-size-fits-all approach.”

Comments on both consultation papers are due by April 29, 2024. ESMA will consider feedback in Q2 2024 and will publish a final report in Q4 2024.

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