In a previous alert, the European Securities and Markets Authority (ESMA) issued a statement encouraging market participants and national competent authorities in EU Member States to prepare for the implementation of the Cryptoassets Market Regulation (MiCA).
The MiCA provisions governing certain stablecoins will apply from June 30, 2024, and the MiCA provisions governing the remaining cryptoassets will apply from December 30, 2024.
ESMA is working towards the implementation of MiCA and is consulting on the various measures that need to be put in place to make MiCA effective. Among the latest consultations is the Consultation Paper (Consultation) on Draft Guidelines on Reverse Solicitation under the Markets in Cryptoassets Regulation (MiCA).
As mentioned in our previous alert “Doing Crypto Business in Europe: MiCAR, the EU’s new harmonized cryptographic code – Part 2”;
- The text of MiCA indicates that the regulation includes: extraterritoriality effect It also requires non-EU crypto asset service providers (CASPs) that provide services to EU-based customers to be licensed under MiCA.
- However, MiCA provides Exception to reverse solicitation This allows EU customers to voluntarily seek out crypto-asset services provided by non-EU CASPs.
Services provided under the reverse solicitation exception are outside the scope of MiCA and the consultation will address this exception.
The consultation includes two draft guidelines:
- Guidelines for Solicitation of Customers by Third Country Companies (Solicitation Guidelines)
- Guidelines for supervisory practices to detect and prevent acts of circumvention of the adverse solicitation exemption
This alert focuses on solicitation guidelines such as:
- means of solicitation
- person who solicits
- Client's exclusive initiative
- Crypto assets or crypto asset services similar to crypto assets
Consultation closes April 29, 2024ESMA will publish the final version of the guidelines, which will then be applied. December 30, 2024when the MiCA provisions governing CASP come into force.
The solicitation guidelines will be of most interest to non-EU CASPs (such as exchanges and custodians based in the US, UK, or other non-EU territories) who wish to offer services within the EU. For many, if not most, non-EU CASPs that do not wish to be licensed under MiCA, reverse solicitation is the only legal means to provide services to EU users.
However, the consultation provides an eerie context for ESMA's use of the sparingly worded exemption. '[The exemption] It should be understood as a very limited and very narrow framework and therefore should not be assumed or exploited to circumvent MiCA. ”
Exemption from adverse solicitation
Reflecting the wording of the Markets in Financial Instruments Directive (MiFID), section 61 of MiCA provides an exemption from adverse solicitation as follows:
- The requirement that a CASP be authorized under MiCA does not apply if the client is established or based within the EU. “Start providing crypto-asset services or activities on your own exclusive initiative” [non-EU] Hard. '
- the solicitation by a company of customers or prospective customers within the European Union; “Regardless of the means of communication used for solicitation, promotion, or advertising in the industry; [EU],'' etc., are not considered to be counter-solicitation.
- “Any contractual terms or disclaimers… This includes any terms or disclaimers relating to the provision of services. [non-EU] Our firm is considered a service provided on the exclusive initiative of the client.' does not change the above position.
Article 61 also requires ESMA to develop solicitation guidelines. But before we move on to these discussions, there is one thing to note. The exemption from adverse solicitation in Article 61 is as follows: Not a general exemption From MiCA: Applicable only to non-EU CASPs. For example, if a non-EU issuer of referenced assets, e-money or other tokens wishing to offer their tokens to EU investors, complying with the provisions of his MiCA regarding creation, notification, issuance, etc. are not exempted. Then, those investors issue a white paper on their own exclusive initiative soliciting tokens from non-EU issuers or their agents.
Key points about the four guidelines are:
1) Means of solicitation
- Solicitation should be broadly interpreted in a technology-neutral manner.
- This may include promoting, advertising, or promoting the Services by any means, including social media platforms, mobile applications, general communications such as invitations to fill out response forms or to participate in training courses, messaging platforms, branded advertising, etc. Offer includes: Through sponsorship deals.
- All the facts and circumstances are relevant, including factors such as the language used on the website and the use of geo-blocks that prohibit EU nationals from accessing the website, and this indicates that a 'non-EU CASP “This is a strong indicator that you are not soliciting.” It can be accessed within the EU via its website.
2) Person who solicits
- Soliciting persons include Non-EU CASPs or other persons acting explicitly or implicitly on their behalf or closely connected to them (Agents), and may also include Influencers.
- Actions that indicate that an individual is acting on behalf of a company include directing viewers to a company's website, providing a means to access a service, offering a promotional deal, or displaying a logo. This includes:
- The fact that the agent is a licensed company, such as a bank or broker-dealer, does not change the EU credit institution's analysis that, for example, redirecting a customer to a non-EU CASP constitutes a solicitation of a violation. . MiCA's.
3) Client's exclusive initiative
- “Client's own exclusive initiative” should be interpreted narrowly.
- Assessments should be fact-based and contractual arrangements or disclaimers cannot override contrary facts (this is clear in the text of the MiCA).
- “Customer’s own exclusive initiative” means that a third country entity provides further crypto-assets or crypto-assets services or activities to the customer, even if such services or activities are of the same type as originally requested. should be construed as not authorizing the provision of activities. Provided by the client unless provided in the context of the original transaction.
- Non-EU CASPs must be able to provide records tracking their relationships with EU customers and, in particular, be able to demonstrate that customers are taking the initiative to receive crypto asset services in relation to new products.
4) Crypto-asset services similar to crypto-assets or other crypto-asset services
- The reverse solicitation regime leaves open the possibility for third country companies to sell crypto assets or crypto asset services and similar activities, subject to compliance with Guideline 3 above.
- This should be assessed on a case-by-case basis, taking into account factors such as (i) the type of asset or service being provided, and (ii) the risks associated with the new asset or service.
- The classification of assets or services must be sufficiently disaggregated so that the adverse solicitation exemption is not abused.
- Guideline 4 includes a non-exhaustive list of pairs of cryptoassets that do not belong to the same type and also include assets that are not stored or transferred using the same technology.
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