A recent report from the European Securities and Markets Authority (ESMA), the EU’s securities markets’ regulator, confirms that the regulation of DLT, tokens and crypto-assets is still under scrutiny at an EU and national level.
ESMA published its report on 12 July on the status of licencing regimes of FinTech firms. The report suggests that whilst pure payment-type crypto-assets are unlikely to qualify as financial instruments, it may be appropriate for certain crypto-assets that are not deemed financial instruments to be subject to some minimal level of regulation. This could make for interesting developments in the regulation of crypto-assets in the wake of the announcement of Facebook’s new “Libra coin”.
Interestingly during the ESMA survey almost all national regulators reported having difficulty in determining when crypto-assets are regulated and when they are not.
The report does not make additional recommendations for changes in EU regulation at this stage, however ESMA noted that it is making continued efforts to foster supervisory convergence on the topic of crypto assets across Member States.
The primary area where regulatory gaps and issues have been identified by NCAs and where FinTech firms do not fit neatly within the existing rules is related to crypto- assets, ICOs and DLT. NCAs called for more clarity at the EU level with respect to the definition of financial instruments and the legal nature of crypto-assets. The NCAs’ responses served to confirm ESMA’s Crypto Asset Advice that certain tokens are financial instruments and subject to the full attendant regulation, while those tokens that are not deemed financial instruments should be subject to some minimal level of regulation