January 09, 2019

ESMA published its advice to the EU Institutions (European Commission, Council, and Parliament) on initial coin offerings and crypto-assets. The advice clarifies the existing EU rules applicable to crypto-assets that qualify as financial instruments and outlines the position of ESMA on any gaps and issues in the current EU financial regulatory framework for consideration by EU policymakers.

The gaps and issues fall into two categories:

  • For crypto-assets that qualify as financial instruments under MiFID, there are areas that require potential interpretation or re-consideration of specific requirements to allow for an effective application of the existing regulations
  • Where these assets do not qualify as financial instruments, the absence of applicable financial rules leaves investors exposed to substantial risksESMA believes that Anti Money Laundering (AML) requirements should apply to all crypto-assets and activities involving crypto-assets. There should also be appropriate risk disclosure in place to make consumers aware of the potential risks prior to committing funds to crypto-assets.

ESMA opines that crypto-assets raise specific challenges for regulators and market participants, as there may be a lack of clarity about how the regulatory framework applies to such instruments. Where it does apply, there may be areas where crypto-assets require potential interpretation or re-consideration of specific requirements to allow an effective application of regulations. Where regulation does not apply to crypto-assets and related activities, regulators need to consider whether it should, and if so how. ESMA considers it important to take a technology-neutral approach, to ensure that similar activities and assets are subject to the same or very similar standards regardless of their form.

ESMA has been working with national competent authorities on analyzing the different business models of crypto-assets, the risks and potential benefits that they may introduce, and how they fit within the existing regulatory framework. ESMA’s work on crypto-assets has highlighted a number of issues that are beyond the remit of ESMA. The advice allows the EU Institutions to consider possible ways in which the noted gaps and issues may be addressed and subjected to further analysis. ESMA will continue to actively monitor market developments in the area of crypto-assets while cooperating with national competent authorities and global regulators.


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Keywords: Europe, EU, Banking, Securities, Crypto-assets, Regtech, Fintech, Distributed Ledger Technology, ESMA