The European Securities and Markets Authority (ESMA) has published new draft guidelines to assist in classifying crypto assets under EU regulations. These proposed guidelines aim to provide clarity on categorising crypto-assets as financial instruments or other asset types.
With the rise of crypto assets like Bitcoin and Ethereum, regulators face challenges in appropriately regulating these novel digital assets. Crypto assets have diverse characteristics, rights, and functions, making their classification complex.
ESMA’s guidelines establish conditions and criteria to determine if a crypto asset qualifies as a “financial instrument” under the Markets in Financial Instruments Directive (MiFID II). The guidelines examine key definitions and concepts like transferable securities, money market instruments and derivatives contracts. Classification hinges on whether the crypto-asset exhibits features akin to traditional financial instruments.
The guidelines also explore the categorisation of crypto-assets under the EU’s new Markets in Crypto-Assets (MiCA) regulation. MiCA delineates crypto-assets into three categories: asset-referenced tokens, electronic money tokens and other unregulated crypto-assets. ESMA provides guidance on the characteristics distinguishing these crypto-asset types.
Additionally, ESMA proposes conditions to identify unique, non-fungible crypto-assets and hybrid crypto-assets blending various features. When classifying hybrids, ESMA recommends prioritising financial instrument categorisation where applicable.
Bottom line: The EU is finally getting going. It’s focus is on creating a framework separating securities and utilities and more and more Web3 companies will get a better steer on how to deal with crypto within the EU.
It should also be borne in mind that this is only a consultation, there is more to come in the final regulations!