Crypto Regulation: ESMA Targets Misleading Promotions
The European Securities and Markets Authority (ESMA) has issued a strong warning to crypto firms operating across the European Union: do not mislead customers about which services are actually regulated under the EU’s new Markets in Crypto-Assets (MiCA) framework. In its July 11 statement, ESMA underscored the importance of transparency as more crypto asset service providers (CASPs) gain licenses to operate under MiCA, which aims to enhance investor protection and market integrity.
MiCA Compliance: Regulated vs. Unregulated Products
While MiCA introduces strict safeguards, ESMA flagged that many platforms continue to offer both regulated and unregulated products without clear distinctions. This mix, ESMA warned, creates significant investor protection risks, as customers may falsely assume that all services on a platform fall under MiCA’s legal protections. The watchdog emphasized that crypto companies must not exploit their MiCA regulatory status as a promotional tool to blur these lines.
Crypto Advertising: Misuse of Regulatory Credentials
“Some CASPs may even use their regulated status under MiCA as a marketing argument and encourage confusion between regulated and unregulated products and services,” ESMA stated. The agency cautioned that doing so not only undermines MiCA’s purpose but also erodes customer trust in regulated crypto markets. MiCA does not cover all crypto-related activities—notably, it excludes direct investments in commodities like gold or crypto lending schemes.
Market Oversight: Malta Under the Microscope
ESMA’s statement follows the release of a peer review of Malta’s regulatory practices. The report found that the Malta Financial Services Authority (MFSA) only “partially” met expectations in its oversight of at least one crypto firm. Although Malta has been praised as an early adopter of crypto regulation within the EU, ESMA’s findings suggest that rapid licensing in some jurisdictions may compromise regulatory standards. The MFSA responded by reaffirming its commitment to investor protection but did not address the specific criticisms.
Licensing Requirements: CASP Passports
Under MiCA, companies offering crypto services must obtain a CASP license from one EU national regulator. This license then functions as a passport, enabling companies to operate across all EU member states. The harmonized licensing approach is intended to simplify operations for crypto firms while ensuring consistent consumer protections across the bloc. However, the recent peer review indicates that implementation and scrutiny levels may vary between member states.
Staff Expertise: New Competency Guidelines Released
In addition to its warning about misleading advertising, ESMA also published new guidelines on July 11 outlining the knowledge and skills that crypto firm employees must possess. These guidelines aim to ensure that CASP staff are adequately trained to assess and manage crypto-related risks and to interact transparently with clients. The move is part of a broader push to elevate professionalism and compliance standards in the rapidly evolving digital asset sector.
FTX Collapse Still Echoes
Regulators around the world remain cautious following high-profile crypto failures like the 2022 collapse of FTX. Millions of retail investors suffered losses, prompting a renewed global effort to strengthen regulatory frameworks. The EU’s MiCA regime is seen as a landmark step toward achieving this goal in Europe, but its success hinges on rigorous enforcement and clear communication from all market participants.
Outlook: Toward Transparent Crypto Markets
ESMA’s warning marks a critical reminder that regulation without proper enforcement can foster a false sense of security. As MiCA takes full effect across the EU, crypto firms must adopt transparent practices, clearly delineate their services, and resist the urge to misrepresent regulatory coverage. The future of Europe’s crypto market will be shaped not only by the laws themselves but by how faithfully they are implemented—both by regulators and the industry they oversee.
