The European Union (EU) is hitting hard with new directives for cryptos. From now on, firms based outside the EU will have to comply with strict conditions to serve European customers. These measures aim to prevent unfair competition and strengthen investor security.
Crypto: a new rule on the block
The European regulator, ESMA, puts in place precise rules for crypto services. Non-European companies can now operate in the EU only if the customer specifically requests it. This initiative, called “ reverse solicitation“, is already known in other EU financial laws. She in fact forces foreign firms to consider opening a branch within the bloc.
The objective? Protecting investors based in the block and crypto service providers compliant with MiCA regulations.
The proposal is open for public consultation until the end of April. Then, the final text should be released by the end of 2024 at the latest.
Proposals of ESMA highlight a limited application of crypto services by third country firms. Only direct requests from customers will allow these restrictions to be circumvented. This exemption is considered an exception. Which demonstrates the firmness of the bloc in the face of external competition.
Towards regulatory integration
ESMA and national regulators are committed to taking all necessary measures. Their goal ? Protect EU investors from unwanted incursions by firms that do not comply with MiCA regulations.
Active solicitation, including marketing campaigns in the EU, remains prohibited for companies from third countries. Thus, the bloc is strengthening its regulatory framework for cryptos, with a clear vision of protecting its citizens and its financial markets.
A second part of the proposal sheds light on the classification of crypto assets. Indeed, some could be considered as “ financial instruments“ , just like stocks or bonds. The EU would then subject these assets to MiFID rules. This illustrates the bloc’s desire to effectively regulate the crypto market and ensure flawless surveillance.
The European Union is determined to protect its market. External companies will therefore have to comply with these rules or consider physically setting up in the block. This major change will likely have a profound impact on the crypto industry.
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