European Commission and ESMA publish Guidance on non-MiCAR compliant ARTs and EMTs

RegCORE – Client Alert | Digital Single Market

QuickTake

As explored in our thought leadership series on the EU’s Market in Crypo-Assets Regulation (MiCAR) certain crypto-assets are likely to be or become non-compliant with the obligations set out in MiCAR. Such non-compliance can lead to a number of consequences.

On 17 January 2025, the European Securities and Markets Authority (ESMA) issued a public statement addressing the provision of certain crypto-asset services in relation to non-MiCAR compliant asset-referenced tokens (ARTs) and e-money tokens (EMTs).Available here.Show Footnote

The statement comes against the backdrop of an earlier statement, issued on 5 July 2024 by the European Banking Authority (EBA)Available here.Show Footnote, calling the attention of issuers, offerors and persons seeking admission to trading of ARTs and EMTs, to comply fully with MiCAR by 30 June 2024 (the EBA Statement). Importantly, the EBA is vested with certain (direct and shared) supervisory powers with respect to both ARTs and EMTs under MiCAR, as set out in more detail in an earlier EU RegCORE Client Alert and has in that vein called on stakeholders to refrain from carrying out services that constitute offering to the public, seeking admission to trading or placing of MiCAR non-compliant ARTs and EMTs.Available here.Show Footnote

With its more recent statement, ESMA has now underscored its expectation to crypto-asset services providers (CASPs) operating a trading platform for crypto-assets to stop making all crypto-assets that would qualify as ARTs and EMTs – but for which the issuer has no authorisation in the EU – available for trading.Available here.Show Footnote This Client Alert provides an overview of what this means for market participants and what should now be done to ensure compliance as soon as possible.

Key takeaways

In an ESMA Q&A issued on 17 January 2025, the European Commission (the Commission) stepped in to provide an answer to clarify what services provided in or into the EU would constitute an offering to the public, a seeking admission to trading or a placing of ART or EMT. In its answer, the Commission made it clear that since 30 June 2024, the provision of crypto-asset services related to ARTs and EMTs without compliance to Titles III and IV of MiCAR is prohibited. This is the case also if the ARTs and EMTs had been first offered to public or admitted to trading before the application of Title III and IV. Since the application of said titles of MiCAR, any issuer of ARTs or EMTs offered to the public or admitted to trading must be authorised in the EU. This is of course subject to the transitional provisions applicable to ARTs under MiCAR. This rule also applies to other persons who wish to offer or seek admission to trading of these tokens. Such persons must ensure that the issuer is authorised in the EU accordance with MiCAR and must obtain written consent from the issuer.

Interestingly, the Commission highlights that other crypto-asset services may also constitute an offer to the public, under certain circumstances, to be evaluated on a case-by-case assessment. In its Q&A, the commission specifies that exchange services, reception and transmission of orders or execution services may also be considered as offering to the public where, as part of these services, ARTs or EMTs are promoted or advertised.Available here.Show Footnote These answers were provided to clarify what services provided in or into the EU would constitute an offering to the public, seeking admission to trading or placing of an ART/EMT.

Importantly, however, the Commission’s Q&A are mere clarifications of provisions already contained in MiCAR and as such do not extend any rights and obligations deriving from such legislation or introduce any additional requirements for relevant stakeholders.

The statement issued by ESMA indeed makes it clear that ESMA, together with the national competent authorities (NCAs) cannot alter EU legal texts but play a crucial role in facilitating a smooth transition to full MiCAR compliance in the single market. In light of the reiterated prohibition, as mentioned above and to mitigate potential disruptions, ESMA now calls on NCAs to ensure compliance by CASPs regarding non-compliant ARTs or EMTs as soon as possible and no later than the end of Q1 2025.

What this means for market participants (and CASPs in particular) is the immediate discontinuing of services that constitute an offer to the public or admission to trading of non-MiCAR compliant ARTs and EMTs. Whether a firm’s services could fall within the scope of this prohibition may require a case-by-case evaluation as clarified in the EBA Statement. In any case and to avoid regulatory actions being taken, CASPs should prioritise restricting these services and avoid entering into new agreements involving non-MiCAR compliant ARTs and EMTs.

In the spirit of investor protection and indeed so as to promote safer capital markets within the EU, in its statement, ESMA calls on CASPs to launch effective communication campaigns so as to raise awareness among EU investors about the impact of non-MiCAR compliant ARTs and EMTs. To aid investors in liquidating or converting their positions in non-MiCAR compliant ARTs and EMTs, CASPs may maintain “sell only” services for these products until the end of Q1 2025. This includes the implementation of measures that facilitate the liquidation or conversion of non-MiCAR compliant holdings, i.e., custody and transfer, as the restrictions attached to the provision of crypto-asset services to non-MiCAR compliant ARTs and EMTs may lead to worse execution conditions for investors that maintain holdings in such products.

Market participants are well reminded that firms may, in the unfortunate event of getting their compliance under MiCAR wrong, face administrative penalties and other administrative measures that could amount to a maximum fine of at least twice the amount of profits gained or losses avoided because of the respective infringement.See Art.111 MiCAR, available here.Show Footnote

The reach of ESMA’s statement certainly does not stop on the continent and within the EEA. MiCAR’s provisions, including on what services are deemed issuing, offering to the public and seeing admission to trading of ARTs and EMTs, apply not only to entities operating within the EU but also to those outside the EU that offer services to EU residents or seek admission to trading within the EU. In the case of doubt, it may be required that such firms engage with the NCAs to avoid any infringements.

Outlook and next steps 

CASPs as well as non-EU firms aiming to operate within the EU, should promptly review their service offerings and ensure alignment with MiCAR requirements, especially those set out in Titles III and IV. This involves ceasing non-compliant activities and preparing for the transition to MiCAR-compliant alternative products, where applicable. Guided and professional engagement with NCAs for guidance and clarification is crucial during this period.

Firms should also effectively communicate with investors as this is vital to ensuring they understand the changes and their implications, especially with respect to retail investors who might not appreciate the technical albeit crucial regulatory difference between MiCAR compliant and non-MiCAR compliant ARTs and EMTs. As mentioned above, CASPs should launch awareness campaigns and provide support t facilitate the transition, including offering “sell only” services and technical solutions for liquidation or conversion.

Firms should stay informed about further regulatory updates and guidance from ESMA and NCAs across the EU. Continuous monitoring of the evolving regulatory landscape will help ensure compliance and readiness for future changes. Proactive adaptation to the regulatory environment is conceivably key to maintaining competitiveness and regulatory compliance.

About us

PwC Legal is assisting a number of financial services firms and market participants in forward planning for changes stemming from relevant related developments. We have assembled a multi-disciplinary and multijurisdictional team of sector experts to support clients navigate challenges and seize opportunities as well as to proactively engage with their market stakeholders and regulators.

In order to assist firms in staying ahead of their compliance obligations we have developed a number of RegTech and SupTech tools for supervised firms. This includes PwC Legal’s Rule Scanner tool, backed by a trusted set of managed solutions from PwC Legal Business Solutions, allowing for horizon scanning and risk mapping of all legislative and regulatory developments as well as sanctions and fines from more than 2,500 legislative and regulatory policymakers and other industry voices in over 170 jurisdictions impacting financial services firms and their business.

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The PwC Legal Team behind Rule Scanner are proud recipients of ALM Law.com’s coveted “2024 Disruptive Technology of the Year Award”. 

If you would like to discuss any of the developments mentioned above, or how they may affect your business more generally, please contact any of our key contacts or PwC Legal’s RegCORE Team via de_regcore@pwc.com or our website.