ESMA Warns on Non-EU Crypto Venues: NCAs to Monitor MiCA Compliance

The European Securities and Markets Authority (ESMA) has
released an Opinion concerning the authorization of global crypto firms under
the Markets in Crypto Assets (MiCA) Regulation.

This Opinion addresses the risks associated with crypto
firms that seek EU authorization for activities such as crypto brokerage while
keeping significant parts of their operations, such as intra-group execution
venues, outside the EU’s regulatory framework.

EU Brokers Routing Orders Concerns

ESMA highlights concerns about the complex structures of
global crypto firms. These structures may involve an EU-authorized broker
routing orders to an execution venue located outside the EU. Such arrangements
could undermine consumer protection and create an uneven playing field compared
to EU-authorized execution venues.

In response to these risks, ESMA advises National Competent
Authorities (NCAs) to exercise caution during the authorization process. It
recommends that NCAs carefully evaluate the business structures of global firms
to prevent them from circumventing MiCA obligations. This approach aims to
protect consumers and ensure the transparent and orderly operation of crypto
markets.

The Opinion emphasizes the need for a case-by-case
assessment. It specifies requirements related to best execution, conflicts of
interest, and the obligation to act in the best interests of clients. It also
covers responsibilities regarding the custody and administration of
crypto-assets on behalf of clients.

Crypto-asset execution venues are crucial for the
crypto-asset ecosystem, and MiCA establishes detailed rules for the operation
of trading platforms for these assets.

#ESMA address risks presented by global #crypto firms seeking authorisation ☂️ #MiCA for part of their activities (crypto brokerage)👇 while keeping a substantial part of their group activities (intra-group execution venues) outside 🇪🇺 regulatory scopehttps://t.co/duh7HHVs0A pic.twitter.com/8M53rwpkX9

— ESMA – EU Securities Markets Regulator 🇪🇺 (@ESMAComms) July 31, 2024

Technical Standards for CASPs

Meanwhile, ESMA
has released its second Final Report under the Markets in Crypto-Assets
Regulation, as reported by Finance Magnates.
This report outlines eight draft technical standards aimed at increasing
transparency for retail investors and clarity for providers.

The standards cover sustainability indicators, business
continuity for crypto-asset service providers (CASPs), trade transparency,
orderbook formats, record-keeping, and the readability of white papers. They
include data protocols to aid supervision by NCAs. The draft standards set
technical requirements for both human and machine readability of crypto-asset
white papers and provide templates for CASP records.

This article was written by Tareq Sikder at www.financemagnates.com.
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