ESMA Calls for Tighter Regulations on Cryptocurrencies Within MiCA Framework

The European Securities and Markets Authority (ESMA) is urging modifications to the European Union’s Markets in Crypto-Assets Regulation (MiCA) due to concerns over the current framework.

On October 16, ESMA issued an official opinion requesting the European Commission to make changes that would strengthen regulatory oversight in the crypto space.

ESMA acknowledged legal limitations raised by the Commission but stressed the importance of the policy objectives behind the original proposal, particularly the need for stricter standards in crypto markets.

The regulator’s recommendations focus on refining two key regulatory technical standards (RTS) within MiCA, covering disclosures on offering crypto services and the authorization process for crypto asset service providers (CASP).

One significant change ESMA is advocating for is the requirement for external cybersecurity audits for CASP applicants. This includes an assessment of management’s integrity and a clean record regarding penalties related to commercial law, insolvency law, or anti-money laundering (AML), while checking for any involvement in fraud or financial misconduct.

ESMA believes these adjustments will enhance the review process for crypto-related service providers in the EU, strengthening market resilience and bolstering investor trust in the crypto ecosystem.

The final decision regarding ESMA’s proposed amendments now rests with the European Parliament and the European Council, who can either adopt the proposed changes with modifications or reject them entirely.

Meanwhile, the European Parliament has the power to object to the revised RTS proposed by the Commission within a three-month window, as the EU prepares for the final implementation of MiCA on December 30.

Anthony Yeung, Global Head of Strategic Development at blockchain protection firm Coincover, highlighted the importance of stronger cyber protection rules in the Web3 industry to attract the next wave of users, emphasizing the need for continued investment in threat prevention and recovery technology.

Benzinga’s Future of Digital Assets event on November 19 will address the evolving landscape of crypto regulation as the market prepares for comprehensive digital asset regulation under MiCA.

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