The European Securities and Markets Authority (ESMA) issued a statement reminding investment firms of the need to disclose the regulatory status of their products, especially digital assets.
⚠️ #ESMA warns investors of risks that arise when investment firms offer both regulated and unregulated products and/or services.
? remind firms of the behaviours they are expected to adopt
? firms may not benefit from regulatory protectionshttps://t.co/TT3CQFgeKs pic.twitter.com/5CPrrbbvid— ESMA — EU Securities Markets Regulator ?? (@ESMAComms) May 25, 2023
ESMA clarified that, while the adoption of the relevant laws is ongoing, cryptocurrencies remain unregulated in most jurisdictions. In its view, digital assets pose risks to investor security.
The adopted 20 April bill on the comprehensive regulation of the crypto industry (MiCA) requires companies to obtain a licence to operate in the bloc, and for stablecoin issuers to have reserve backing. The provisions will come into force in 2025.
To mitigate risks, ESMA recommends investment firms take steps to ensure that clients understand the regulatory status of the products offered. They should also inform users when legal protections do not extend to their services.
Companies should take into account the impact of unregulated activity on their business when developing policies and risk-management systems, ESMA added.
In May, the Council of the European Union, comprising 27 member states, unanimously approved MiCA. EU member states also approved new anti-money laundering measures.