ESMA Issues Opinion on How International Cryptocurrency Companies Use Their Non-EU Execution Venues
The EU’s financial markets supervisor and regulator, the European Securities and Markets Authority (ESMA), released an Opinion to address the risks posed by international cryptocurrency firms looking to be authorized under the Markets in Crypto Assets (MiCA) Regulation for some of their activities (crypto brokerage) while keeping a sizable portion of their group activities (intra-group execution venues) outside the EU’s regulatory scope.
This Opinion is a component of larger initiatives by National Competent Authorities (NCAs) and ESMA to guarantee that MiCA and convergent supervisory techniques are applied effectively across the EU. The functioning of the crypto-asset ecosystem depends heavily on crypto-asset execution venues, and MiCA lays out detailed guidelines for how crypto-asset trading platforms must operate.
When it comes to complicated crypto companies, ESMA acknowledges the dangers involved, especially in cases where execution venues are not covered by MiCA. In these kinds of arrangements, an EU-authorized broker might be involved, which would route orders to an intragroup execution venue located outside the EU and perhaps reduce consumer protection and create an unfair playing field with EU-authorized execution venues.
In light of these dangers, ESMA advises NCAs to exercise caution when granting authorization and to examine the corporate structures of multinational companies to make sure they comply with MiCA’s requirements for consumer protection and the transparent and efficient operation of the cryptocurrency markets.
The Opinion stipulates the particular requirements that must be fulfilled with regard to best execution, conflicts of interest, the duty to act honorably, fairly, and professionally in the best interests of clients, as well as the duty pertaining to the custody and administration of crypto-assets on behalf of clients. It also advocates for a case-by-case evaluation.
According to Binance, this kind of ESMA’s intervention aims to address the risks posed by global crypto companies seeking partial authorization for certain crypto brokerage activities under MiCA regulations while keeping a significant portion of their internal execution venues outside the EU regulatory framework.
