Key Takeaways
- • ESMA proposes stricter marketing rules for crypto-assets, including enhanced oversight of influencer promotions and third-party endorsements, to reduce investor exposure to inadequately disclosed risks.
- • The regulator recommends expanded supervisory powers to detect and block fraudulent websites, freeze crypto assets in cases of suspected market abuse or terrorist financing, and enforce compliance among third-country firms soliciting EU investors without MiCA authorization.
- • ESMA calls for proportionate disclosure requirements covering staking, lending, and borrowing arrangements—including collateral structures, reward mechanisms, and potential loss scenarios—to be mandated before investment decisions.
- • Enhanced cost transparency and explicit rules preventing regulated crypto firms from offering services linked to non-compliant stablecoins are proposed to address regulatory arbitrage and protect market integrity.
- • These recommendations emerge from ESMA's response to the European Commission's public consultation on the Markets in Crypto-Assets Regulation (MiCA) review, addressing gaps in investor protection for emerging business models including decentralized finance (DeFi).
Summary
On investor protection, ESMA identifies specific risk areas inadequately covered under the current MiCA framework. The authority proposes stricter rules governing the marketing of crypto-assets, with particular emphasis on preventing inadequately disclosed promotion by influencers and third parties. ESMA also recommends mandatory greater transparency in investment costs and proportionate disclosure requirements for staking, lending, and borrowing services. These enhanced disclosures would require service providers to clearly communicate collateral arrangements, reward mechanisms, potential loss scenarios, and other material information before investors commit capital—addressing information asymmetries that currently characterize DeFi and related services.
ESMA's supervisory recommendations focus on closing enforcement gaps and building regulatory capacity. The authority seeks enhanced powers to detect, block, and deactivate fraudulent websites; freeze crypto assets in cases of suspected market abuse or terrorist financing; and enforce compliance among third-country firms actively soliciting EU investors without MiCA authorization. These measures target unauthorized service providers and non-compliant stablecoin offerings that currently operate in regulatory gray zones, enabling both fraud and regulatory arbitrage. ESMA also proposes explicit rules preventing regulated crypto firms from offering services linked to stablecoins that do not meet MiCA requirements—a safeguard designed to prevent compliance-neutral workarounds.
The recommendations reflect ESMA's assessment that current supervisory frameworks lack adequate capacity to address crypto-specific risks, including emerging threats such as maximal extractable value (MEV) manipulation and DeFi-specific vulnerabilities. By integrating crypto-specific oversight into existing surveillance infrastructure and building supervisory capabilities around these novel risk vectors, ESMA aims to achieve more consistent and faster supervisory action across EU member states while reducing opportunities for regulatory arbitrage. These proposals position MiCA as an evolving framework capable of addressing innovation while maintaining investor protection and financial stability objectives.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.