The MiCA regulation imposes new environmental sustainability disclosure obligations for crypto companies in Europe. However, many entities appear to be misinterpreting the deadlines, which could result in significant regulatory consequences.
Crypto companies' confusion over disclosure deadlines
Many crypto companies in the European Union appear to be in the dark about the deadlines for sustainability disclosure, despite clarifications from regulators. According to Tim Zölitz, Chief Risk Officer at Crypto Risk Metrics, a large majority of crypto asset service providers are unaware that ESG (environmental, social, and governance) data disclosure is set to begin on January 1, 2025. This confusion could result from a misinterpretation of the regulations, where some wrongly believe that transparency obligations only come into force with the publication of white papers on cryptoassets, scheduled for 2027.
Despite clarifications from the European Securities and Markets Authority (ESMA), many of these entities are still unaware of the precise requirements. Crypto Risk Metrics recently signed a Memorandum of Understanding with the Digital Token Identifier (DTI) Foundation to collaborate on the display of ESG data. This initiative aims to improve transparency and help crypto asset service providers comply with the new regulations. However, the environmental impact of crypto activities, particularly mining, remains a major concern, potentially hindering the wider adoption of these assets. The industry must adapt quickly to avoid potential sanctions and promote sustainable growth.
Clarifications and consequences
MiCA rules, established to regulate the cryptoasset market in Europe, impose strict requirements on environmental transparency. According to the guidelines, issuers of asset-referenced tokens (ART) and electronic money tokens (EMT) must begin disclosing their environmental impacts as early as June 30, 2024. Additionally, all crypto asset service providers must comply with ESG disclosure requirements by the end of the year. However, this obligation has often been misunderstood, with some in the industry mistakenly believing that these disclosures were only required upon the publication of white papers, set for 2027.
This misinterpretation stems in part from the initial wording of MiCA, which was subsequently clarified by the European Securities and Markets Authority (ESMA). In a consultation document, ESMA clarified that information on environmental impacts must be published on the entities' website, independently of white papers. This clarification aims to eliminate any ambiguity, but there remain gray areas.
Exchange platform operators must also ensure that this information is accessible in a clear and visible manner. Lack of compliance could not only result in regulatory sanctions, but also tarnish the reputation of crypto companies, thereby hindering the adoption of these assets by large, environmentally conscious institutional investors.
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