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ESMA has submitted recommendations to the European Commission’s consultation on reviewing the EU’s Markets in Crypto-Assets Regulation. The proposals include stronger disclosures and supervision, clearer rules for DeFi and token classification, and simpler procedures; they are recommendations, not adopted changes.
The European Securities and Markets Authority (ESMA) has urged the European Commission to amend the Markets in Crypto-Assets Regulation (MiCA), proposing clearer rules, stronger investor safeguards and a framework for emerging services such as decentralised finance (DeFi), staking, lending and borrowing. The recommendations form ESMA’s response to the Commission’s public consultation and are proposals, not changes already in force.
For investors, ESMA proposes stricter rules for crypto-asset marketing, particularly promotions involving influencers and other third parties, as well as greater transparency about costs. It also recommends proportionate requirements for staking, lending and borrowing, including disclosures explaining risks, rewards, collateral arrangements and potential losses before customers commit funds.
On supervision, ESMA wants stronger tools to address fraudulent websites, unauthorised services and non-compliant stablecoins. Its proposals include the ability to detect, block and deactivate fraudulent sites, and to freeze crypto-assets in cases of suspected market abuse or terrorist financing. It also seeks stronger powers over firms based outside the EU that solicit European customers without MiCA authorisation.
ESMA further recommends explicit rules to prevent regulated crypto firms from offering services connected to stablecoins that do not meet MiCA requirements. To address DeFi, it calls for clearer criteria to determine whether an activity is genuinely decentralised and proposes a new regulated crypto-asset service for firms that give users access to DeFi protocols.
Stronger Safeguards for Crypto Customers
The recommendations address practical gaps that can affect whether customers understand what they are buying and whether supervisors can respond when services cross borders. More detailed disclosures for staking, lending and borrowing could make it easier for users to compare costs, returns and potential losses. Tighter marketing requirements could also clarify responsibilities when crypto products are promoted by influencers or outside parties.
Supervisory powers are another focus. ESMA says tools to act against fraudulent websites and unauthorised firms could support faster, more consistent action across EU countries. A common approach to DeFi and token classifications could reduce differences in how similar activities or products are treated. These are intended benefits of the proposals; the source does not quantify their likely effects.
The recommendations also look beyond the immediate MiCA review. ESMA says the EU needs a framework for tokenised securities and on-chain settlement to support an integrated tokenised capital market and cross-border activity. That work could shape how regulated financial markets use blockchain-based infrastructure, but ESMA presents it as a longer-term need rather than an existing MiCA measure.
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MiCA Review and Its Scope
MiCA is the EU regulatory framework for crypto-assets. The European Commission is reviewing the regulation and sought public input; ESMA, the EU financial markets regulator and supervisor, submitted recommendations as part of that process. Its response covers both possible changes to existing rules and areas where it believes new or clearer provisions are needed.
ESMA’s submission combines investor protection and supervisory proposals with calls to simplify administration. It recommends streamlining crypto-asset white-paper notification procedures, reducing duplicate authorisation requirements for some regulated firms, and improving consistency in prudential requirements. The stated aim is to reduce burdens while maintaining protections.
For classification, ESMA proposes rules covering crypto-assets including hybrid tokens, which may combine characteristics of different categories. It also recommends authority for ESMA to issue binding opinions on token classification, with the aim of ensuring that the same products receive consistent treatment across the EU. The source does not provide draft legal text or explain how such opinions would be issued.
“ESMA’s recommendations aim to simplify the framework while improving investor protection and addressing innovative business models.”
— European Securities and Markets Authority
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Proposals Await Commission Decisions
ESMA’s response is advisory input to a public consultation. The source does not say which proposals the European Commission will accept, whether it plans legislative amendments, or when any decisions or draft changes may follow. Until a change is formally adopted and takes effect, the recommendations should not be read as new obligations for firms.
Several operational details are also unsettled in the material provided. It does not set out the proposed thresholds for classifying an activity as genuinely decentralised, define the scope of a new DeFi access service, or specify how powers to block websites or freeze assets would be exercised. The treatment of particular hybrid tokens and the precise reach of rules on third-country firms are likewise not explained.
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Commission Review Sets the Next Step
The next step is for the European Commission to consider ESMA’s recommendations alongside other responses to its consultation as it reviews MiCA. The source provides no timetable for that process or confirmation that the Commission will pursue specific amendments.
If the Commission advances changes, the details would need to clarify which proposals become legal requirements, who would supervise them and when they would apply. Readers should watch for Commission announcements or draft legislation on disclosures, DeFi classification, stablecoin-linked services, supervisory powers and the proposed simplifications.
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Key Questions
Has MiCA already changed because of ESMA’s recommendations?
No. ESMA has submitted recommendations to the European Commission’s consultation. The source does not report that any of them have been adopted or entered into force.
What investor protections does ESMA propose?
ESMA recommends stricter rules for crypto marketing, including promotions by influencers and third parties, more transparency about costs, and proportionate disclosures for staking, lending and borrowing that cover risks, rewards, collateral and possible losses.
What does ESMA want to change for DeFi?
It proposes clearer criteria for deciding which activities are genuinely decentralised and a new regulated crypto-asset service for firms that provide users access to DeFi protocols. The source does not specify the proposed service’s detailed requirements.
What happens to the proposals now?
The European Commission will consider ESMA’s response as part of its MiCA review. No decision or timetable for adopting the proposals is given in the source material.
Source: primary
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