In its latest proposal, the European Securities and Markets Authority (ESMA) has called for firmer operating limits on non-EU crypto firms providing services inside the bloc.
The proposal brought forward by the ESMA is intended to ensure that crypto firms based outside the EU are compliant with the Markets in Crypto-Assets Regulation (MiCA) passed last year.
MiCA represents the first comprehensive set of rules in place for crypto markets in leading economies. The framework is intended to protect consumers’ digital assets and set clear boundaries in an industry where international borders have been difficult to police.
MiCA: Full crypto compliance
In its statement, the ESMA says: “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.
“This exemption should be understood as very narrowly framed and must be regarded as the exception. A firm cannot use it to bypass MiCA.”
Indeed, this suggests that cases in which a client of a non-EU crypto firm exclusively requests for and initiatives specific services of said firm, will be limited to exceptional circumstances where a crypto firm’s solicitation attempts are undeniably non-existent.
For example, a non-EU crypto firm could not rely on the exemption rule to offer subsequent services after being solicited by a customer. Only by being solicited in the same way again can an international firm offer its services.
Of course, this may cause headaches for international crypto players when developing the right product and service compliance infrastructures, but, for the EU, it sends a clear message that MiCA should be taken seriously.
ESMA: Protecting MiCA-compliant crypto firms
The purpose of tightening reverse solicitation rules (where a customer initiates a desire for a product/service), has two inferred purposes.
The first, evidently, is to ensure that EU-based investors and MiCA-compliant crypto-asset service providers are actively protected from ‘undue incursions’ by non-EU and non-MiCA-compliant entities.
This ensures a level playing field is maintained for crypto firms seeking to scale their now-regulated business inside the EU.
The second, perhaps more understated intention of the ESMA’s statement, is to encourage crypto firms outside of the EU to open a branch or subsidiary on European territory.
Not only would this make compliance far simpler for international crypto bodies, but it would also grant access to what is currently the largest regulated crypto market in the world.
How many crypto firms choose to play ball, though, and expand their operations into the EU, remains to be seen.
