Europe’s securities regulator, the European Securities and Markets Authority (ESMA), issued a warning on Friday to crypto companies about misleading customers regarding the regulatory status of their products. The caution comes as European authorities intensify efforts to curb risks associated with crypto assets.
Under the EU’s new crypto regulation framework, known as MiCA, a series of investor protections are in place, including rules on safeguarding client assets and managing complaints. However, ESMA highlighted concerns over crypto asset service providers (CASPs) offering both regulated and unregulated products on the same platform, which poses risks to investors who may not clearly understand which products fall under MiCA’s protections.
ESMA pointed out that some CASPs might exploit their regulated status as a marketing tool, potentially confusing customers about which services are regulated. The regulator stressed that firms must not use their MiCA licensing as a promotional device or suggest that all crypto offerings are covered by the EU’s rules when they are not.
Products outside MiCA’s regulatory scope include direct investments in commodities like gold and crypto lending services.
The move follows global regulatory concerns about crypto investor risks, especially after the collapse of major crypto platforms such as FTX in 2022, which resulted in significant investor losses.
MiCA requires companies offering crypto services to obtain a license from national regulators, enabling them to operate across the EU. ESMA also issued guidance on the knowledge and competence standards that staff should meet to properly assess crypto companies.
ESMA’s warning coincides with the release of a peer review on Malta’s licensing process for crypto firms. The review found that while Malta’s Financial Services Authority has sufficient expertise and resources, its authorization procedures only “partially” met expected standards. Malta defended its role as an early adopter of digital asset regulation but did not directly respond to ESMA’s critique.
Concerns have been raised behind closed doors about the rapid pace at which some EU member states grant crypto licenses, according to previous Reuters reports.