The European Securities and Markets Authority (ESMA) has released new guidance stating that EU-based crypto firms can provide services to non-EU customers in certain situations. According to ESMA, this is subject to the condition that the client is the exclusive initiator of the service. While this allowance, known as reverse solicitation exemption, provides some flexibility, ESMA clarifies that it is a narrow exemption and cannot be used to circumvent the rules outlined in the Markets in Crypto Assets Regulation (MiCA), which came into effect in June 2023.
ESMA underscores that the reverse solicitation exemption is strictly limited and serves as an exemption rather than a loophole. The agency aims to prevent companies from exploiting this exemption to bypass the regulatory framework set by MiCA. The guidance provided by ESMA emphasizes that any crypto firm operating under this exemption must ensure compliance with the rules established by MiCA when serving non-EU customers.
Although the consultation paper on this exemption is still under review and subject to potential changes, ESMA’s statement implies that the rule is currently applicable based on their earlier communications. The comments received in response to the paper primarily address specific applications of the exemption and the supervisory practices that authorities can employ to prevent any potential violations.
In addition to the consultation paper on the reverse solicitation exemption, ESMA has also published a separate consultation paper regarding the guidelines for classifying crypto-assets as financial instruments. These guidelines aim to bridge the gap between the recent MiCA regulations and the existing Markets in Financial Instruments Directive II (MiFID II), which governs traditional financial instruments such as securities.
ESMA acknowledges that there is a need to strike a balance between regulating the cryptocurrency industry and allowing innovation to thrive. The agency suggests that the rules for crypto-assets established by MiCA may adopt a flexible approach similar to the lighter touch employed in the regulation of traditional financial instruments under MiFID II. ESMA’s aim is to foster a regulatory environment that facilitates growth and ensures investor protection while not stifling innovation and development in the crypto industry.
As the consultation process continues, both companies operating in the crypto space and regulatory authorities will closely monitor the outcomes. The finalization of the guidance will provide a clearer understanding of the rules and requirements for EU-based crypto firms serving non-EU customers. This increased regulatory clarity will contribute to a more transparent and secure environment for stakeholders in the cryptocurrency industry.
ESMA’s recent guidance allows EU-based crypto firms to cater to non-EU customers in specific cases. However, it is crucial for these firms to adhere to the rules defined by MiCA and to recognize that the reverse solicitation exemption is not an opportunity for evading regulation. By aligning the classification of crypto-assets with existing financial instrument regulations, ESMA aims to establish a comprehensive framework that balances innovation and investor protection within the crypto industry.
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