The European Securities and Markets Authority (ESMA), the financial markets regulator of the European Union, has recently released a second consultation paper on the Markets in Crypto Asset (MiCA) regulation. This document, released on October 5th, aims to encourage stakeholders’ involvement in various sectors of the crypto market, leading to a smooth implementation of MiCA by 2024.
ESMA is seeking input and suggestions from market participants until December 14th. The final draft, including recommendations, will be published in the first quarter of 2024. The paper emphasizes five key areas in which blockchain firms, asset issuers, and crypto executives can provide valuable contributions.
Addressing Blockchain Sustainability
One of the pressing concerns for regulators and climate activists is the sustainability of blockchain technology. To tackle this issue, ESMA is requesting quantitative metrics from stakeholders regarding the use of fossil fuels, energy intensity, the type of equipment used as nodes, and the sector’s waste products. The aim is to develop a framework to assess the sustainability of consensus mechanisms and their environmental impact.
“The sustainability of consensus mechanisms is influenced by various factors,” states the draft paper.
Ensuring Continuity and Regularity in Crypto Operations
ESMA is also focusing on the continuity and regularity of operations within the crypto industry. The regulator will use the business continuity requirements outlined in the MiCA framework as a benchmark for crypto firms. In order to comply, these companies must establish a comprehensive Business Continuity Policy (BCP), including the implementation of an ICT system, preservation of online trade data, and timely recovery of digital asset services.
“The business continuity requirements set by MiCA will serve as a guide for the operations of crypto firms,” asserts the document.
Furthermore, MiCA Article 76 (16)(a) addresses the transparency of pre and post-trade data in the crypto market. ESMA will develop draft regulatory technical standards to specify the manner in which transparency data, including the level of disaggregation of the data to be made available to the public, should be presented.
“ESMA shall develop draft regulatory technical standards to further specify: (a) the manner in which transparency data, including the level of disaggregation of the data to be made available to the public as referred to in paragraphs 1, 9, and 10, is to be presented.”
Pre-trade activities require all crypto service providers to publicly display bid and ask prices, as well as other relevant information, throughout the process. Post-trade requirements oblige firms to preserve transaction details such as time, price, and volumes on their platforms, ensuring that this information is constantly displayed and accessible in real-time.
In conclusion, ESMA’s second consultation paper on the MiCA regulation aims to gather input and suggestions from stakeholders in the crypto market. The document emphasizes the importance of blockchain sustainability and the need for continuity and regularity in the operations of crypto firms. By involving market participants, ESMA endeavors to create a well-regulated and sustainable environment for the crypto asset industry.
