EU advances crypto regulation with second MiCA consultation paper

The European Securities and Markets Authority (ESMA), the regulatory body responsible for overseeing financial markets in the European Union, has taken another significant step toward regulating the burgeoning cryptocurrency sector.

On 5 October, the ESMA released a second consultative paper addressing key aspects of Markets in Crypto-Assets (MiCA) regulations. This 307-page document represents a critical milestone in the EU’s ongoing efforts to bring clarity and structure to the rapidly evolving crypto space.

Within this extensive document, the ESMA solicits input and feedback from stakeholders on five crucial aspects of MiCA.

These areas of focus include sustainability indicators for distributed ledger technologies (DLTs), disclosures of inside information, technical requirements for white papers, trade transparency measures, and record-keeping standards for crypto-asset service providers (CASPs).

Europe takes the next step

The sustainability indicators proposed by the authority encompass both quantitative metrics and qualitative assessments. They address critical environmental concerns related to blockchain network nodes, such as energy consumption, greenhouse gas emissions, and waste production.

This approach reflects the EU’s commitment to addressing the environmental impact of cryptocurrency operations.

Regarding post-trade transparency, the ESMA outlines requirements for CASPs to report various essential details, including trading and publication timestamps, crypto-asset identification, pricing information, transaction quantity, execution venue, and transaction ID. This comprehensive reporting framework aims to enhance market transparency and investor protection within the crypto sphere.

Moreover, the ESMA introduces flexibility by allowing CASPs to store transaction data in a format they deem most suitable.

However, it stipulates that CASPs must have the capability to convert this data into a standardized format upon request from regulatory authorities. This provision accommodates variations in data management while ensuring regulatory access and oversight.

The ESMA’s timeline for these regulatory developments is well-defined. The authority plans to publish a final report, incorporating feedback from stakeholders, and submit the draft technical standards to the European Commission by 30 June, 2024.

In anticipation of this milestone, the ESMA will issue a third consultation package in the first quarter of 2024, providing further opportunities for industry input.

In a previous consultation paper released in July, the ESMA proposed that crypto companies registered under MiCA would need to provide additional information through notifications to the national competent authorities in their respective countries.