Key Points:
- ESMA urges revisions to the EU’s MiCA framework, pushing for stricter oversight of crypto markets.
- Proposed changes focus on regulatory technical standards covering disclosures and authorization processes for crypto service providers.
- ESMA advocates for mandatory external cybersecurity audits for firms applying to offer crypto services.
- The European Parliament and Council will decide whether to adopt or reject the proposed amendments.
ESMA Calls for Tougher Crypto Regulations
The European Securities and Markets Authority (ESMA) has raised concerns over the current structure of the European Union’s Markets in Crypto-Assets Regulation (MiCA), pushing for changes aimed at improving regulatory oversight of the cryptocurrency market. On October 16, ESMA released an official opinion urging the European Commission to adopt stricter standards to enhance investor protection and market resilience.
In its statement, ESMA highlighted the importance of addressing gaps in the existing framework, despite acknowledging the legal constraints raised by the Commission. The regulator emphasized that the policy objectives behind the initial proposal must be upheld to safeguard the integrity of the crypto market.
The proposed changes focus on refining two key regulatory technical standards (RTS) within MiCA. These RTS outline essential requirements for disclosing intentions to offer crypto-related services and the process of obtaining authorization as a crypto asset service provider (CASP).
One of the most significant revisions proposed by ESMA is the introduction of mandatory external cybersecurity audits for CASP applicants. According to the regulator, firms seeking to operate in the crypto space should provide an external review of their management’s integrity, in addition to demonstrating a clean record in areas such as commercial law, insolvency law, or anti-money laundering (AML) regulations.
European Parliament and Council to Make Final Decision
ESMA believes that these stricter requirements will significantly improve the resilience of the crypto market and increase investor trust. In its view, a thorough vetting process will ensure only reputable and reliable companies can offer crypto-related services in the EU. The proposed external cybersecurity audits are expected to enhance the security infrastructure of crypto firms, providing an additional layer of protection for investors against fraud and misconduct.
The final decision on whether to adopt these proposed amendments rests with the European Parliament and the European Council. The council has the authority to either approve or reject the RTS, potentially with modifications. Meanwhile, the European Parliament can object to the revised standards within a three-month period.
The European Union’s efforts to finalize the MiCA framework come as the region prepares for its official implementation on December 30. This marks a key milestone in the EU’s journey toward a comprehensive regulatory regime for digital assets.
Industry experts are already weighing in on the proposed changes. Anthony Yeung, Global Head of Strategic Development at Coincover, a blockchain protection firm, stressed the importance of strong cybersecurity measures. “While regular external security audits will certainly help improve the industry, they won’t eliminate the threat completely,” he said, adding that crypto firms must continue to invest in prevention and recovery technologies to secure their platforms fully.
As the debate over crypto regulation intensifies, ESMA’s push for tighter rules underscores the growing concern over the security and reliability of digital asset markets. The upcoming decision by the European Parliament and Council could shape the future landscape of cryptocurrency regulation across the region.