EU reinforces tight limits on crypto firms from outside bloc
Technology
EU reinforces tight limits on crypto firms from outside bloc
LONDON (Reuters) - Crypto companies based outside the EU will only be able to directly serve customers within the bloc under very limited conditions to avoid unfair competition, the European Securities and Markets Authority (ESMA) proposed on Monday.
The EU approved the world's first comprehensive rules for crypto markets last year, known as MiCA, a groundbreaking move in an online sector where national borders have been hard to police.
The latest EU proposals on how crypto firms and regulators should apply the law in practice cover crypto asset firms from outside the EU, opens new tab that want to offer services to EU customers directly, rather than from a physical base inside the bloc.
"The proposed guidance confirms ESMA's previous message that the provision of crypto-asset services by a third-country firm is limited under MiCA to cases where the client is the exclusive initiator of the service," ESMA said in a statement.
Initiation by the customer is known as 'reverse solicitation' and a concept seen in other EU financial laws that the bloc's policymakers have tightened up on, putting pressure on foreign firms to open a branch or subsidiary in the EU.
"This exemption should be understood as very narrowly framed and must be regarded as the exception."
The proposal is out to public consultation until the end of April, with a final text due by the end of 2024 at the latest.
ESMA said that it and national regulators in the EU would take "all necessary measures to actively protect EU-based investors and MiCA-compliant crypto-asset service providers from undue incursions by non-EU and non-MiCA compliant entities."
Actual solicitation of business in the EU by a third country firm, which would include undertaking a marketing campaign in the 27-country bloc, is prohibited, ESMA said.
A non-EU firm could not rely on the exemption to subsequently offer further services, unless in the same context as the original transaction, it added.
