Key Highlights
- ESMA wants stronger MiCA rules to improve investor protection and tighten supervision of crypto firms.
- DeFi, staking, lending, and borrowing could face clearer rules, while ESMA also wants better crypto-asset classification.
- ESMA also wants to simplify some MiCA requirements and reduce duplicated rules for regulated crypto companies.
The European Securities and Markets Authority (ESMA) has proposed changes to the European Union’s Markets in Crypto-Assets Regulation (MiCA), calling for stronger investor protection and tighter supervision while also simplifying some requirements.
According to the official release published on Wednesday, one of ESMA’s main concerns is how crypto products are promoted to the public. The regulator wants stricter rules for crypto marketing, especially when influencers and other third parties promote digital assets. The recommendations come as the European Commission reviews MiCA and considers how the framework should change as the crypto market grows.
ESMA also wants investors to receive clearer information before using crypto services. This includes details about fees, risks, possible rewards, collateral arrangements, and potential losses.
The regulator also wants clearer rules for activities such as staking, lending, and borrowing. These services have become more common across the crypto market, but the regulator wants users to receive enough information to understand what they are entering before making a decision.
The push for stronger supervision is another major part of ESMA’s recommendations. The regulator wants the EU to have better tools to find, block, and shut down fraudulent crypto websites and freeze crypto assets in cases of suspected market abuse or terrorist financing.
Tighter checks on overseas firms
ESMA is also looking at crypto companies based outside the European Union. It wants stronger powers to deal with firms from third countries that target EU investors without having the required authorisation under MiCA.
The regulator also wants clear rules stopping regulated crypto companies from offering services connected to stablecoins that do not meet MiCA requirements.
As the crypto industry changes, ESMA is also turning its attention to decentralized finance (DeFi). The regulator wants clearer rules for deciding whether a crypto activity is truly decentralized. It has also proposed creating a new regulated crypto-asset service for companies that give users access to DeFi protocols.
Another issue is how crypto-assets are classified. ESMA wants clearer rules for deciding what type of asset a particular token is, including newer products such as hybrid tokens. It has also proposed giving ESMA the power to issue binding opinions on token classification. This could help ensure that the same type of crypto product is treated in the same way across EU countries.
Some MiCA rules could get simpler
However, ESMA is not asking for every part of MiCA to become stricter. It also wants to reduce some of the rules that create extra work for businesses. Its recommendations include simpler procedures for notifying crypto white papers, fewer duplicated authorization requirements for some regulated companies, and more consistent financial safety requirements.
The proposals come as several major EU financial bodies give their views on the MiCA review. On September 24, the European Banking Authority (EBA) asked the European Commission to consider bringing crypto lending and borrowing under MiCA, including cases where licensed crypto firms give customers access to DeFi lending protocols.
The EBA’s recommendations are part of the European Commission’s MiCA review and do not themselves amend the regulation. The EBA said it was recommending legislative changes for consideration, including potentially expanding the list of crypto-asset services and introducing requirements for firms that facilitate access to DeFi lending protocols.
Earlier, on September 22, the European Central Bank (ECB) and the EU’s national central banks focused on stablecoin reserves.
They asked Brussels to change how stablecoin issuers hold reserves, arguing that issuers should not be forced to keep a fixed share of those reserves as bank deposits. Instead, they proposed that a minimum part of reserves should be held in assets that mature within one to five working days.
Together, these responses form part of the European Commission’s wider review of MiCA. ESMA is also looking beyond the immediate review, calling for a future framework for tokenized securities and on-chain settlement that could support greater cross-border activity in European financial markets.
Also Read: UK FCA Opens Crypto Authorisation Applications Ahead of 2027 Regime
