EU Develops Paper Outlining Exceptions to MiCA Regulation
Last year, the European Union unanimously approved the Markets in Crypto Assets (MiCA) bill, which is widely regarded as the first comprehensive legislation to address the crypto industry as a whole.
MiCA is a part of the broader set of financial laws called DORA, and it has prompted many crypto companies to consider relocating their operations overseas.
Various Adjustments to the Bill
Although MiCA was published in June 2023, there have already been two consultation sessions on the bill, with another one scheduled for April, before the first part of the legislation becomes effective in June 2024. The remaining provisions are expected to take effect in December 2024.
🔴 #ESMA publishes 2⃣ Consultations Papers on guidelines under Markets in Crypto Assets Regulation #MiCA:
📣 on reverse solicitation
📣 on the classification of crypto-assets as financial instruments🗓️ Send your comments by 29 April 2024https://t.co/PEosx4t3UO pic.twitter.com/v31nWMUEcu
— ESMA – EU Securities Markets Regulator 🇪🇺 (@ESMAComms) January 29, 2024
The proposed exceptions aim to provide European customers with greater freedom while still safeguarding those who are less knowledgeable about technology.
Introduction of “Reverse Solicitation”
The European Securities and Markets Authority (ESMA) has submitted a paper that takes into account previous feedback regarding companies operating outside the EU. It has decided to make exceptions for these companies when necessary.
Previously, the authority intended to prohibit non-EU companies from offering crypto assets and services to EU citizens. However, the new provision will allow them to do so if “reverse solicitation” occurs. Reverse solicitation refers to a scenario where an EU citizen explicitly requests such services from a provider.
This would enable experienced crypto investors seeking specialized offerings to legally invest, while also safeguarding inexperienced investors from potential consequences when dealing with businesses where legal recourse may be more challenging.
“ESMA previously underlined that the provision of crypto-asset services or activities by a third-country firm is strictly limited under MiCA to cases where such service is initiated at the own exclusive initiative of a client. This exemption should be understood as very narrowly framed […] and it cannot be assumed, nor exploited to circumvent MiCA. ESMA, and national competent authorities, through their supervisory and enforcement powers, will take all necessary measures to actively protect EU-based investors and MiCA-compliant crypto-asset service providers from undue incursions.”
The ESMA encourages investors to review the document and submit any requests or feedback by April 29th, when regulators will discuss the matter.
The regulator is also seeking feedback on the potential classification of crypto assets as financial instruments, which are defined as monetary contracts. If a crypto asset qualifies as a monetary contract, it would no longer be subject to MiCA but would instead fall under the regulatory oversight of another bill called MiFID II.