ESMA Proposes Key Updates to MiCA for Crypto Security

ESMA Proposes- EU Watchdog Calls for Changes to Cryptocurrency Framework

ESMA Proposes– The European Union’s markets regulator has expressed the need for modifications to the bloc’s cryptocurrency regulatory framework, known as the Markets in Crypto-Assets Regulation (MiCA). On October 16, the European Securities and Markets Authority (ESMA) issued an official opinion urging the European Commission to update several key aspects of this framework.

ESMA’s Stance on MiCA

In its opinion, the ESMA acknowledged the legal challenges highlighted by the Commission but stressed the importance of the underlying policy objectives of the initial MiCA proposal. The regulator emphasized the necessity of ensuring that the framework remains effective and responsive to the evolving crypto landscape.

Specifically, the ESMA evaluated proposed amendments to two regulatory technical standards (RTS) concerning data disclosures related to intentions to provide crypto asset services and the authorization process for crypto asset service providers (CASPs).

Recommended Amendments for Enhanced Security

Among the ESMA’s recommendations is a proposal to mandate that CASP applicants undergo an external cybersecurity audit. The regulator articulated that this audit should encompass an assessment of the reputability of the management body’s members. Additionally, the ESMA is advocating for a thorough vetting process that checks for any penalties outside the scope of commercial law, insolvency law, and anti-money laundering regulations.

The ESMA outlined that these regulatory technical standards aim to facilitate a thorough entry point assessment for entities seeking to offer crypto asset services in the EU. By doing so, the authority believes it will bolster the resilience of the crypto assets market and enhance investor protection within this domain.

Next Steps for MiCA Amendments

The ESMA has communicated its opinion not only to the European Commission but also to the European Parliament and the European Council. The Council holds the power to either adopt the two RTS with relevant amendments or to reject them outright. The ESMA noted that both the European Parliament and the Council have a three-month window to object to any RTS adopted by the Commission.

As Europe approaches the final deadline for MiCA, expected to take effect on December 30, some prominent cryptocurrency firms—such as Tether, a stablecoin issuer—have cautioned that certain aspects of MiCA could introduce new risks to local banking infrastructures and stablecoin operations.

A representative from the ESMA also informed Cointelegraph that the regulator is aware of concerns raised by market participants regarding MiCA’s Titles III and IV, and it is actively engaging with stakeholders to address these issues effectively.

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