The European Securities and Markets Authority (ESMA), which is the European Union’s financial markets regulator and supervisor, has published its second consultative paper in the set of three on Markets in Crypto-Assets (MiCA) mandates.
MiCA is a regulation that institutes uniform EU market rules for crypto-assets. Key provisions for issuing and trading crypto-assets cover transparency, disclosure, authorisation and supervision of transactions.
Approved by the European Parliament on 20 April, MiCA will come into force in three levels in 2024 and 2025. The framework seeks to support market integrity and financial stability by regulating public offers of crypto-assets and by ensuring consumers are better informed about their associated risks.
Released on 5 October, ESMA seeks to input five sets of proposed rules through the latest consultation paper. This includes sustainability indicators for distributed ledgers, disclosures of inside information, technical requirements for white papers, trade transparency measures, record-keeping and business continuity requirements for crypto-asset service providers (CASPs).
The 307-page long document also covered multiple sustainability indicators. Amongst this, it counted quantitative metrics on the consumption of energy, greenhouse gas emissions and the production of waste, together with a qualitative statement on the impact of the use of equipment by blockchain network nodes on natural resources.
When it came to pre-trade transparency, ESMA acknowledged the Recital 22 of MiCA that “….Where crypto-asset services are provided in a fully decentralised manner without any intermediary” should fall outside the scope of MiCA but also notes that the exact scope of this exemption remains uncertain.
Here, ESMA considers that an assessment of each system should be made on a case-by-case basis considering the features of the system. According to ESMA, it would be useful to clarify how pre-trade transparency should apply to such protocols. It then stated that this is “without prejudice to any possible clarification that can be published in the future regarding the scope of the exemption for fully decentralised systems”.
On the other hand, for post-trade transparency, the ESMA proposed that CASPs should be required to report trading and publication date and time, identification of the crypto-asset, pricing information, quantity, venue of execution and transaction ID.
The entity also suggested allowing CASPs to store transaction data in “the format they consider most appropriate”. However, they should be willing and able to convert it into a specified format when requested by the authorities.
The regulator has now encouraged stakeholders to provide their feedback to this consultation by 14 December 2023. The next steps include the publishing of a final report on the basis of feedback received. This will then be followed by the submission of the draft technical standards to the European Commission for endorsement by 30 June 2024 at the latest.
Before this, ESMA will also release a third consultation package with the remaining 18-month mandates in Q1 of 2024. The first consultation package was published in July 2023. It sought feedback on regulatory technical standards and on the implementation of technical standards for notifications from CASPs.
