The article aims to "improve... understanding of cryptoasset trading and the extent to which it resembles or differs from traditional financial markets." It also identifies current and potential areas of risk, not only to consumers but also to market order and financial stability. Finally, the analysis "informs and supports the implementation of the EU Markets in Crypto-Assets (MiCA) regulation".

The letter provides an update on the status of applications received by national competent authorities to date, as well as a list of challenges and opportunities identified in the first year of application.

ESMA has been empowered to develop technical standards and guidelines specifying certain provisions of MiCA. To fulfil this, ESMA has drafted technical standards for those mandates found in Chapter 1 of Title VII dealing with the powers of competent authorities and cooperation between competent authorities, the European Banking Authority (EBA), and ESMA. These technical standards detail how competent authorities, the European Supervisory Authorities (ESAs), and third-country authorities should cooperate with each other in the performance of their duties under MiCA.

The report contains two draft Regulatory Technical Standards (RTS) and two Implementing Technical Standards (ITS) relating to:

(i) the exchange of information between competent authorities,

(ii) procedures, forms and templates for the exchange of information between competent authorities,

(iii) procedures, forms and templates for exchange of information between competent authorities and ESMA/EBA, and

(iv) the template for cooperation with third-country authorities.

ESMA will submit the Final Report as well as the draft regulatory and implementing standards to the European Commission. The Commission has three months to decide whether to adopt the technical standards. The European Commission may extend that period by one month. The regulatory technical standards will also be subject to non-objection by the European Parliament and Council. 

In the consultation package, ESMA is seeking input on four sets of proposed rules and guidelines, covering:

• Detection and reporting of suspected market abuse in cryptoassets (RTS).
• Policies and procedures, including the rights of clients, for cryptoasset transfer services (Guidelines).
• Suitability requirements for certain cryptoasset services and format of the periodic statement for portfolio management (Guidelines).
• ICT operational resilience for certain entities under MiCA (Guidelines).

Deadline for comments is 25 June 2024.

ESMA will publish a final report based on the feedback received and will submit the draft technical standards to the European Commission for endorsement by 30 December 2024 at the latest.

The report includes proposals on:

• information required for the authorisation of cryptoasset service providers (CASPs);
• the information required where financial entities notify their intent to provide cryptoasset services;
• information required for the assessment of intended acquisition of a qualifying holding in a CASP; and
• how CASPs should address complaints.

ESMA has submitted the Final Report to the European Commission and will provide further advice and technical guidance in this area if requested by the Commission.

The draft RTS fulfil a mandate conferred on the EBA in the Markets in Crypto-Assets Regulation (MiCAR) and were developed in cooperation with the European Securities and Markets Authority (ESMA).

The updated answers relate to:

• New CASPs established before (and after) 30 December 2024
• Passporting rights for entities benefiting from grandfathering
• Prohibition of monetary and non-monetary benefits
• Provision of crypto-asset services by credit institutions
• Notifications under Article 60

ESMA also updated answers relating to Credit Rating Agencies (CRA) Regulation,  European Market Infrastructure Regulation (EMIR) Regulation, and Markets in Financial Instruments Regulation (MiFIR) Regulation.

For the consultation on reverse solicitation, ESMA is seeking input on proposed guidance relating to the conditions of application of the reverse solicitation exemption and the supervision practices that National Competent Authorities (NCAs) may take to prevent its circumvention. 

The proposed guidance "confirms ESMA’s previous message that the provision of cryptoasset 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."

For the consultation on classification of cryptoassets as financial instruments, ESMA is seeking input on establishing clear conditions and criteria for the qualification of cryptoassets as financial instruments. This initiative, which follow on from previous work by ESMA, is aimed at "bridging the MiCA regulation and the Markets in Financial Instruments Directive II (MiFID II) and ensuring consistency across the EU." 

The proposed guidelines "aim at providing NCAs and market participants with structured but flexible conditions and criteria to determine whether a cryptoasset can be classified as a financial instrument." 

Deadline for comments for both consultations is 29 April 2024.

See also our article EU: ESMA consults on ‘reverse solicitation’ and classification of cryptoassets under MiCA.