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ESMA has submitted recommendations to the European Commission’s review of the EU’s Markets in Crypto-Assets Regulation, proposing changes to investor safeguards, supervision and rules for emerging crypto services. The recommendations are proposals, not adopted changes; the Commission’s next steps and any legislative timetable were not specified in the material provided.
The European Securities and Markets Authority (ESMA) has urged the European Commission to revise the EU’s crypto-asset rules, proposing clearer protections for investors and a framework for services such as decentralised finance (DeFi), staking and crypto lending. The recommendations respond to the Commission’s public consultation on the review of the Markets in Crypto-Assets Regulation (MiCA); they are proposals, not changes already in force.
ESMA says the review should address gaps in investor protection, including how crypto-assets are marketed, particularly through influencers and other third parties. It also proposes greater transparency about costs and proportionate disclosure requirements for staking, lending and borrowing. The information provided to investors would cover costs, risks, rewards, collateral arrangements and possible losses before they decide to participate.
For supervision, ESMA recommends expanding the EU’s ability to respond to fraudulent websites, unauthorised services and non-compliant stablecoins. Its proposals include stronger powers concerning firms based outside the EU that solicit European investors without MiCA authorisation, and explicit rules to prevent regulated crypto firms from offering services linked to stablecoins that fail to meet MiCA requirements. ESMA also calls for powers to detect and disable fraudulent websites and to freeze crypto-assets in cases involving suspected market abuse or terrorist financing.
The authority proposes clearer criteria for deciding whether activities are genuinely decentralised and a new regulated crypto-asset service for businesses that give users access to DeFi protocols. It also wants common rules for classifying crypto-assets, including hybrid tokens, and the ability for ESMA to issue binding opinions on classification. Alongside those measures, it advocates simplifying white-paper notifications, reducing some duplicated authorisation requirements and making prudential rules more consistent.
How the Proposals Could Affect Crypto Services
If adopted, the recommendations could change what crypto businesses must disclose and how regulators oversee services offered to EU customers. More explicit information about fees, risks and collateral could help investors compare products and understand potential losses, while restrictions involving stablecoins could affect which services regulated firms are permitted to offer.
The proposals also address a regulatory boundary: whether a service is genuinely decentralised, or whether a company is operating an intermediary service that should be regulated. ESMA’s suggested category for firms providing access to DeFi protocols could bring some activity currently described as decentralised within a clearer supervisory framework. Binding classification opinions could also reduce the chance that similar tokens receive different treatment in different EU countries.
These potential effects depend on what the Commission proposes and what EU lawmakers ultimately approve. ESMA’s recommendations indicate areas it wants examined; they do not themselves impose new duties on firms or establish that existing MiCA protections have failed in every area raised.
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MiCA Review and Emerging Crypto Models
MiCA is the EU framework for crypto-assets and related services. The European Commission is reviewing the regulation through a public consultation, and ESMA’s response sets out the regulator’s recommendations for that process. ESMA is the EU authority responsible for financial markets oversight and supervision, and its submission is an input to the review rather than a final legislative decision.
The proposals address business models and products that ESMA says need clearer treatment as crypto markets develop, including DeFi, stablecoins, staking, lending and borrowing. It also looks beyond the immediate MiCA review to the development of tokenised securities and on-chain settlement. ESMA says a framework for these areas could support an integrated European tokenised capital market and cross-border activity, but this part of its submission is a longer-term policy direction rather than a specific rule already scheduled to take effect.
ESMA also frames some recommendations as simplification: streamlining white-paper notification procedures, avoiding duplicated authorisations for some regulated firms and improving consistency in prudential requirements. The source material does not specify which firms would qualify for reduced duplication or the exact legal wording ESMA proposes.
“The recommendations aim to simplify the framework while improving investor protection and addressing innovative business models.”
— ESMA, in its response to the European Commission’s consultation
Details Await the Commission’s Response
ESMA’s submission does not establish that any of its recommendations will become law. The source material does not give a timetable for the Commission’s response, say which proposals it may accept, or describe draft legislative text. It is also unclear how proposed powers to block websites or freeze assets would be defined, authorised and applied in practice.
Further detail is also absent on the boundaries of the proposed DeFi-access service, the test for deciding whether an activity is genuinely decentralised, and how binding token-classification opinions would operate. The specific disclosure formats and the scope of any new requirements for influencers, staking or lending providers have not been set out in the material. These questions would need to be resolved in any formal proposal and subsequent legislative process.
Commission Review and Possible Rulemaking
The next step is for the European Commission to consider ESMA’s submission alongside responses to its public consultation and decide whether to propose changes to MiCA. ESMA’s recommendations alone do not change the regulation. Any legislative amendments would require further drafting and approval through the EU’s lawmaking process before new requirements could take effect.
Readers should watch for a Commission response or legislative proposal setting out which recommendations are taken forward, the proposed scope of new rules and any implementation timetable. Until then, the recommendations remain ESMA’s policy proposals, and the current MiCA framework remains the relevant rulebook.
Key Questions
Has MiCA changed as a result of ESMA’s recommendations?
No. ESMA has submitted proposals to the Commission’s review. The recommendations do not themselves amend MiCA or create new legal obligations.
What investor protections does ESMA want to add?
ESMA proposes stricter safeguards for crypto marketing, including promotions by influencers and third parties, and more disclosure about costs, risks, rewards, collateral and possible losses for staking, lending and borrowing.
What does ESMA propose for DeFi?
It recommends clearer criteria for identifying genuinely decentralised activities and a new regulated service category for firms that provide users with access to DeFi protocols. The exact boundaries are not specified in the source material.
What is ESMA proposing for token classification?
ESMA wants common rules for classifying crypto-assets, including hybrid tokens, and authority to issue binding opinions intended to support consistent treatment across the EU.
When could any proposed changes take effect?
No timetable is given. The Commission must first consider the consultation and decide whether to put forward amendments; any legislative changes would then need approval before taking effect.
Source: primary
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