MiCAR – Final guidelines on reverse solicitation

RegCORE – Client Alert | Digital Single Market

QuickTake 

The EU’s Market in Crypto-Assets Regulation (MiCAR) became fully operational as of 30 December 2024. As explored in PwC Legal’s EU RegCORE’ series covering developments across the “EU’s Digital Single Market, financial services and crypto-assets” MiCAR marks a momentous achievement in creating (i) a new chapter of the EU’s Single Rulebook for certain types of crypto-assets that are not classified as “financial instruments” and (ii) concurrently extending existing chapters of the Single Rulebook to those crypto-assets that do qualify as “financial instruments”.

MiCAR thus introduces the world’s largest Single Market for crypto-assets, with uniform concepts and rules applicable to crypto-asset issuers (CAIs) as well as crypto-asset service providers (CASPs). In accordance with Article 59(1) of MiCAR, only legal persons or other undertakings that have been authorised as CASPs under Article 63 of MiCAR and certain EU-authorised financial entities (subject to a notification procedure) may provide crypto-asset services in the EU. Only a firm with a registered office in a Member State of the EU shall be able to be authorised as CASP in accordance with Article 63 of MiCAR. Accordingly, “third-country” i.e. non-EU firmsIn full the definition used is: “A firm that would be subject to Article 59 of MiCAR if its head office or registered office were located within the EU.”Show Footnote may not solicit EU-27 clients as they are not authorised to provide CASP services in the EU, but clients are free to use such third-country firms if they choose to do so provided they have not been solicited by such firms.

As offerings of and trading activity in digital-assets, whether regulated or not as “crypto-assets” by MiCAR or as financial instruments and thus under traditional EU legislative and regulatory rulemaking regimes continues to grow, so too do the questions on how and when reverse solicitation (also known as reverse enquiry) exemption for third-country firms can be applied as well. The reverse solicitation exemption, as defined in Article 61 of MiCAR, allows third-country firms to provide crypto-asset services or activities to clients in the EU only if such service or activity is “initiated at the own exclusive initiative of the client, without any solicitation by the third-country firm”. MiCAR’s reverse solicitation exemption may not be relied upon by EU-based firms to “escape the authorisation or notification requirements” under MiCAR.

On 17 December 2024, the European Securities and Markets Authority (ESMA) published its Final Report containing, in Annex III, the now final Guidelines regarding reverse solicitation (the Reverse Solicitation Guidelines) under MiCAR.Available here.Show Footnote As discussed in an earlier Client Alert assessing the draft version of the guidelines, ESMA ran a consultation between January and April 2024 and received 35 responses from industry as well as advice from ESMA’s Securities and Markets Stakeholder Group (the SMSG). These responses have been reflected in the 13 pages that make up the final Reverse Solicitation Guidelines and in the 36 pages of the Final Report setting out the context and rationale for the changes plus industry and SMSG feedback. This provides useful context to ESMA’s and other supervisors’ expectations of (all) market participants as it relates to the permitted use of reverse solicitation.

This Client Alert assesses the key takeaways for traditional financial services firms and for CASPs as well as CAIs resulting from ESMA’s commentary set out in the Final Report and in the principles communicated in the Reverse Solicitation Guidelines and how this differs from the draft version. This Client Alert should equally be read in conjunction with the Client Alert on ESMA’s guidelines on qualification of crypto-assets as financial instruments with further analysis on MiCAR (notably also on use of social media and/or (f)influencers) along with further coverage on supervisory clarifications provided by ESMA and its sister European Supervisory Authorities (ESAs) comprised of the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) plus expectations of the European Central Bank (ECB).

Key takeaways from ESMA’s Reverse Solicitation Guidelines

ESMA takes the view that the definition of solicitation and the person soliciting should be construed broadly. Accordingly, the exemption in the Reverse Solicitation Guidelines, like in the draft version, is meant to be very narrowly framed, time bound and should not be used to circumvent MiCAR or to harm EU-based investors and MiCAR-compliant CASPs.