30s Summary

The European Securities and Markets Authority (ESMA) has issued final guidelines for EU countries to fully implement the Markets in Crypto-Assets (MiCA) rules by the end of December 2024. The guidance addresses concerns over the legal interpretation and classification of crypto-assets. Despite the guidance, some member states reportedly struggled to meet the deadline, citing a lack of clarity in the MiCA laws. ESMA, however, has committed to continue working with lawmakers and stakeholders to resolve these issues without changing the original laws.

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The European authority for financial market regulations, aka ESMA, has issued final instructions to help EU countries fully adopt the crypto market rules (MiCA).

These rules began to be implemented in June 2024 and are scheduled to be fully in place by the end of December. This final set of instructions is to help those countries that are still a bit confused about the transition beat the end-of-the-year deadline.

As reported, the stablecoin market has experienced a boom under MiCA rules. Yet, as of Dec. 10, at least six EU member states (including Belgium, Italy, and Portugal) struggled to meet the end-of-year deadline. They had a hard time understanding the original MiCA documents.

According to ESMA’s final instructions:

“Most people welcomed the clarity of the draft instructions and ESMA’s thorough approach. Some pointed out the need for even more clarity on specific matters, while others were worried about potential administrative chores the draft instructions might create.”

During the discussion period, member states and interested parties from the industry were very active. They helped ESMA address 12 concerns, mainly about classifying specific assets and their legal usage.

One big worry was that different countries could end up interpreting many MiCA laws differently due to vague explanations.

“Some noted the possibility of legal uncertainty because of the scope of the instructions and how the specific conditions and criteria could be understood by NCAs”, ESMA wrote, adding that this could lead to different interpretations in individual member states.

To solve these concerns, ESMA incorporated several explanatory scenarios dealing with digital asset regulation under MiCA. However, the report mentions that MiCA didn’t provide real-life examples because the instructions can’t express a view on how to classify specific cryptos or similar assets.

The document also checked concerns about EU’s MiFID II instructions, a regulation put in place post the 2008 financial crisis to standardise financial practices across the EU.

EU countries are asking for an update to include a clear definition of crypto assets as financial instruments. In reaction, ESMA’s guidance suggests providing more details on MiFID II rules without changing how financial instruments are defined. This could help find the right balance between determining how crypto-assets are classified while making sure regulations apply to all types of crypto-assets.

Countries also expressed concerns about lack of clarity in MiCA laws to decide which assets could be legally moved, how to ensure “technology neutrality” and how classifications such as “securities,” and “derivatives” are applied to different types of crypto-assets.

Despite this being the final set of guidance before the Dec. 30 deadline, ESMA assured throughout the 49-page document that it would keep working with lawmakers and interested parties to develop more clarity without altering the original laws.