The European Securities and Markets Authority (ESMA) responded to the European Commission’s consultation on the review of the Markets in Crypto-Assets Regulation (MiCA) on September 30, proposing new powers to freeze crypto assets linked to crime and block fraudulent websites. The EU’s financial markets regulator said its recommendations aim to simplify the framework while strengthening investor protection and addressing emerging models such as decentralised finance (DeFi), staking, lending and borrowing. The submission arrives as Brussels weighs whether MiCA remains fit for purpose after the regime began applying in full earlier this year.
Tougher investor protections
ESMA proposed stricter rules for crypto-asset marketing, especially when products are promoted by influencers and third parties, and called for greater transparency on costs. It also backed proportionate requirements for staking, lending and borrowing, including disclosure obligations so investors receive clearer information on costs, risks, rewards, collateral arrangements and potential losses before committing funds. The proposals follow the European Banking Authority’s separate call to regulate crypto lending in the same MiCA review.
Stronger supervisory powers
To counter unauthorised services, online fraud and non-compliant stablecoins, ESMA recommended enhancing the EU’s capacity to detect, block and deactivate fraudulent websites and to freeze crypto assets where market abuse or terrorist financing is suspected. It cautioned that current procedures are so lengthy that freezing requests for suspicious assets often arrive too late, after the funds have disappeared. ESMA also sought reinforced powers to deal with third-country firms that solicit EU investors without MiCA authorisation, and explicit rules to stop regulated crypto firms from offering services linked to stablecoins that do not comply with MiCA. The push responds to concerns among some national regulators about patchy enforcement and regulatory divergence across the bloc.
DeFi, classification and tokenised markets
ESMA advocated clearer criteria for deciding when activities are genuinely decentralised and proposed a new regulated crypto-asset service for firms that give users access to DeFi protocols. It recommended rules for classifying crypto-assets, including hybrid tokens, and backed granting ESMA the power to issue binding opinions on token classification. Looking beyond MiCA, it urged a framework for tokenised securities and on-chain settlement to support an integrated European tokenised capital market. The recommendations extend ESMA’s earlier coordinated crypto custody review under MiCA.
