Written by Hugh Jones
LONDON (Reuters) – Cryptocurrency companies based outside the European Union will only be able to directly serve customers within the bloc under very limited circumstances to avoid unfair competition, the European Securities and Markets Authority (ESMA) proposed on Monday.
The European Union approved the world's first comprehensive rules for cryptocurrency markets last year, known as MiCA, a pioneering move in the internet sector where national borders are difficult to police.
The EU's latest proposals on how crypto companies and regulators should implement the law in practice cover crypto asset companies from outside the EU that want to provide services to EU clients directly, rather than from a physical base within the bloc.
“The proposed guidance confirms ESMA’s previous message that the provision of crypto asset services by a company from a third country is limited under MiCA to cases where the customer is the exclusive initiator of the service,” ESMA said in a statement.
The initiative by the client is known as “reverse solicitation,” a concept appearing in other EU financial laws that policymakers in the bloc have tightened, putting pressure on foreign companies to open a branch or subsidiary in the EU.
“This exemption should be understood to be very narrow and should be considered an exception.”
The proposal is scheduled to be put out for public consultation until the end of April, with the final text due by the end of 2024 at the latest.
The European Securities and Markets Authority said it and EU national regulators will take “all necessary measures to effectively protect EU-based investors and MiCA-compliant crypto asset service providers from unwarranted incursions by non-EU and non-MiCA-compliant entities.” .
The European Securities and Markets Authority said the actual solicitation of business in the EU by a company from a third country, which could include undertaking a marketing campaign in the 27-nation bloc, is prohibited.
It added that a non-EU company could not rely on the exemption to provide further services later, except in the same context as the original deal.
The second set of proposed guidelines sets out the circumstances under which crypto assets can be considered a “financial instrument” like stocks or bonds, and therefore also subject to separate MiFID rules for the block.
(Reporting by Hugh Jones; Editing by Alexander Smith)
