The European Union’s markets regulator ESMA (European Securities and Markets Authority) has published a second consultation paper on the EU’s far-reaching Markets in Crypto-Assets legislation.
MiCA entered into force in June 2023, bringing all cryptocurrency and blockchain companies operating in the bloc under the same regulatory umbrella.
ESMA is now seeking public input on a range of key areas of the legislation to determine if the framework is fit for purpose. These areas include:
ESG reporting
MiCA brought in mandatory sustainability reporting requirements for DLTs to document the consumption of non-renewable energy, greenhouse gas emissions, the generation of hazardous waste, and the impact on natural resources of the use of equipment by DLT network nodes.
Insider information
Under MiCA rules, public disclosure of inside information is essential to avoid insider dealing and ensure that investors are not misled.
Issuers, offerors, or persons seeking admission to trading are required to inform the public as soon as possible of inside information that directly concerns them.
This information should be disclosed in a manner that ensures fast, complete, correct, and timely access by the public. The information must also be posted and maintained on their website for at least five years.
In cases where National Competent Authorities (NCAs) suspect entities of not properly disclosing inside information, they may be able to seek remediation through supervisory and investigative powers.
White paper requirements
MiCA proposes that white papers should be machine-readable, not designed as promotional material, but containing mandatory disclosures as prescribed by legislation.
ESMA intends to require certain metadata to make white papers easily searchable through its database.
Transparency
ESMA noted that users can access information on executed transactions through public blockchains, promoting peer review analysis and market development. This is an inherent aspect of cryptocurrency technology.
Under MiCA, trading platforms are required to make public any bid and ask prices and the depth of trading interests at those prices which are advertised through their trading platforms.
Post-trading rules require trading platforms to make public the price, volume and time of the transactions executed in respect of crypto assets traded on their trading platforms.
ESMA stated that trading platforms should disclose their operating rules transparently and non-discriminatorily, ensuring investors have easy access to this information.
Record keeping
Crypto-asset service providers are required to keep records of any policies and procedures they are mandated to maintain. An audit trail of the assessment and periodic review by the management body of the company should also be kept, including any deficiencies identified and measures taken to address them.
Companies are required to prepare a business continuity policy and implement a business continuity plan as part of their organizational requirements.
ESMA said it will publish a final report on the basis of feedback received on the above by June 30, 2024.
A third consultation paper is also expected in the first quarter of 2024.