In a recent announcement, the European Securities and Markets Authority (ESMA) brought attention to crypto assets, reminding companies that while regulations such as the Markets in Crypto-Assets Regulation (MiCA) are on the verge of adoption, crypto will remain unregulated in most jurisdictions until MiCA applies. ESMA expressed concerns over the offerings of products and services that are not regulated, considering they carry prudential and investor protection risks. Additionally, the financial watchdog believes that clients could be “misled as to the level of protection they get.”
To address such risks, ESMA suggested that investment firms ensure that their clients are aware of the regulatory status of the products they invest in. Apart from this, the regulator recommended that firms clearly inform clients when regulatory protections do not apply to the products or services being provided. ESMA also encouraged investment firms to consider the impact of unregulated activities on their businesses when planning their risk management policies and systems.
Meanwhile, crypto firms such as Gemini and Kraken are looking to expand their businesses in Europe, setting up in Ireland. Gemini’s founder Cameron Winklevoss confirmed that they have chosen Ireland as their “entry point into the EU.” Kraken has also begun preparations to expand its operations in Europe, with a Dublin-based subsidiary receiving a virtual asset service provider authorization from the country’s central bank.
With the upcoming adoption of MiCA, the crypto landscape in the European Union is about to change. Despite the anticipation of stricter regulations, crypto firms continue to establish their presence in the region, signaling a strong interest in European markets and clients. As for individual investors, understanding the regulatory status of crypto products is crucial for their financial safety, and ESMA’s guidelines emphasize the necessity for investment firms to make this information clear and transparent for their clients.