European Securities and Markets Authority (ESMA) advice on initial coin offerings and crypto-assets clarifying EU rules and ESMA position. An excerpt from the introduction appears below:
ESMA has noted that some Member States have or are considering some bespoke rules at the national level for all or a subset of those crypto-assets that do not qualify as MiFID financial instruments. While ESMA understands the intention to bring to the topic both a protective and supportive approach, ESMA is concerned that this does not provide for a level playing field across the EU. ESMA believes that an EU-wide approach is relevant, also considering the cross-border nature of crypto-assets.
This Advice outlines ESMA’s position on the gaps and issues that exist in the rules within ESMA’s remit when crypto-assets qualify as financial instruments and the risks that are left unaddressed when crypto-assets do not qualify as financial instruments. Section II sets out the legal basis of the Advice; Section III sets out the rationale of the Advice; Section IV outlines key concepts and provides an overview of the crypto-asset ecosystem; Section V assesses the risks and issues that regulators should consider when dealing with crypto-assets; Section VI looks at the circumstances under which crypto-assets may qualify as MiFID financial instruments or not; Section VII outlines how the current financial services rules apply to those crypto-assets that qualify as MiFID financial instruments and the challenges that arise as a result; Section VIII outlines ESMA’s position on the gaps and issues that EU policymakers should consider, and if relevant and subject to further cost-benefit analysis, seek to address.
Considering the novelty of crypto-assets and the evolving business models, ESMA expects that some follow-up work will be needed, as the market develops: i) on how the existing regulatory framework applies to crypto-assets which fall within its scope; and ii) on what requirements could be considered for types of crypto-assets which are currently not subject to any EU rules and how to define the scope of such measures. ESMA will continue actively monitoring market developments, in an effort to foster supervisory convergence among NCAs. ESMA will also continue to engage with global regulators, as we believe international cooperation is required to address this global phenomenon.