The main European securities regulator issued a warning to crypto companies about overstating their regulatory coverage of their products under the new EU MiCA framework. The European Securities and Markets Authority (ESMA) requires crypto asset providers to present their regulated and unregulated products in separate categories. ESMA observed that certain companies use their MiCA-compliant status to market their entire service range as regulated. The practice leads to investor confusion and increased risks because platforms provide both protected and unprotected assets to their customers. ESMA emphasized that crypto-asset lending together with commodity-linked tokens fall outside the regulatory scope of MiCA. The warning emerged from ESMA’s assessment of Malta’s crypto licensing process which revealed its regulator failed to meet ESMA standards when approving an unidentified firm. The early regulatory initiatives of Malta received defense from the country but the EU states face criticism for their inconsistent enforcement practices. The EU’s MiCA framework requires crypto firms to get authorization from any single national authority before they can operate throughout the bloc. ESMA published new guidelines on Friday which define the necessary qualifications for evaluating crypto offerings. The worldwide regulatory community continues to monitor crypto markets because FTX’s collapse revealed substantial weaknesses in investor protection systems. The EU’s unified framework works to stop future market disruptions through its regulatory approach.
