The report, published on April 10th, 2024, was part of ESMA’s Risk Analysis on Trends, Risks, and Vulnerabilities. It was prepared under the legal reference of Regulation (EU) No 1095/2010 of the European Parliament and Council of 24 November 2010. This regulation establishes a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC, Article 32. 

The report’s purpose is to assess market developments, including stress tests. ESMA is tasked with monitoring and assessing market developments in its area of competence. Where necessary, it informs the European Supervisory Authority (European Banking Authority), and the European Supervisory Authority (European Insurance and Occupational Pensions Authority), the European Systemic Risk Board, and the European Parliament, the Council, and the Commission about relevant micro-prudential trends, potential risks, and vulnerabilities. 

The report includes an analysis of the markets in which financial market participants operate and an assessment of the impact of potential market developments on such financial market participants. The information contained in the publication, including text, charts, and data, exclusively serves analytical purposes. 

Please note that the report does not provide forecasts or investment advice, nor does it prejudice, preclude, or influence in any way past, existing, or future regulatory or supervisory obligations by market participants. The charts and analyses in the report are, fully or in part, based on data not proprietary to ESMA, including from commercial data providers and public authorities. 

The key findings of the ESMA report “Crypto assets: Market structures and EU relevance” are as follows:

  • Guidance on Existing EU Rules: ESMA provided guidance on the existing EU rules applicable to crypto assets that qualify as MiFID II financial instruments.
  • Gaps in the EU Regulatory Framework: The report highlighted certain gaps in the EU regulatory framework, particularly the fact that investor protection rules are not generally applicable to crypto assets that do not qualify as financial instruments. This means that investors in such crypto assets may not have the same level of protection as those investing in regulated financial instruments.

Additionally, below are some additional ESMA guidelines on the existing EU rules applicable to crypto assets that qualify as MiFID II financial instruments.

  • The Markets in Financial Instruments Directive (MiFID II) is an EU legislation that regulates firms who provide services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded.
  • Crypto assets that qualify as financial instruments under MiFID II are subject to the existing EU rules. These rules cover a wide range of areas, including transparency, disclosure, authorisation, and supervision of transactions. The aim is to ensure fair, transparent, efficient, and integrated financial markets.
  • ESMA’s guidance clarifies how these rules apply to such crypto assets. For instance, it outlines the key requirements likely to apply and identifies possible gaps and issues. This guidance is intended to help market participants understand their regulatory obligations and to ensure a level playing field across the EU.

However, it’s important to note that the application of these rules to crypto assets is not straightforward and can present challenges. These challenges arise from the unique characteristics of crypto assets and the technology used to create and transfer them.

For more detailed information, you may want to refer to the full report here.

Additional Resources