On 29 January 2024, the European Securities and Markets Authority (ESMA) launched public consultations on two sets of guidelines it is mandated to develop for the purpose of the application of the Regulation on Markets in Crypto-Assets (MiCAR). The draft guidelines cover reverse solicitation and the qualification of crypto-assets as financial instruments.

The following provides a high-level overview of the key points included in both consultation documents.

Draft guidelines on reverse solicitation

By way of background, MiCAR requires any person that wishes to provide services in crypto-assets to be authorised as a crypto-asset service provider (CASP). The only exemption to the authorisation requirement applies where such service is initiated at the own exclusive initiative of a client (the so called “reverse solicitation” exemption). ESMA has indicated that such exemption should be construed very narrowly and the purpose of the guidelines is to provide further guidance on the conditions of application of the reverse solicitation exemption, in particular in the context of third-country firms, and provide additional clarity on the limited situations where the offer or provision of crypto-asset services to clients established or situated in the EU would be regarded as initiated at the own exclusive initiative of the relevant clients.

Accordingly, in its draft guidelines ESMA considers the term “solicitation” very broadly and in a technology-neutral manner, covering activities such as banner advertisements, sponsorship deals, solicitation by any kind of affiliates such as influencers and other celebrities. ESMA applies a similar broad interpretation to the person soliciting, this being a third-country firm or any person on its behalf. The draft guidelines also include provisions on how to assess whether the third-country firm markets a new type of crypto-asset or crypto-asset service or activity; such assessment being a matter of case-by-case analysis.

The draft guidelines consist of the following:

  • Guideline 1: Means of solicitation.
  • Guideline 2: Person soliciting.
  • Guideline 3: Exclusive initiative of the client.
  • Guideline 4: When is a crypto-asset or a crypto-asset service of the same type as another one.

Draft guidelines on the qualification of crypto-assets as financial instruments

MiCAR does not apply to those instruments that qualify as financial instruments within the meaning of the Markets in Financial Instruments Directive II (MiFID II). That said, due to the fact that there were varying approaches to Member States’ transposition of MiFID II across Member States, there is no harmonised application of the definition of “financial instrument” in the EU. ESMA has therefore been mandated to provide guidance to Member State competent authorities and market participants on the qualification of crypto-assets as financial instruments, including the relevant conditions and criteria. ESMA adopts a technology-neural approach in its draft guidelines, stressing that the application of financial markets legislation does not depend on the actual use of any technology.

The draft guidelines consist of the following:

  • Guideline 1: General.
  • Guideline 2: Classification as transferable securities.
  • Guideline 3: Classification as money-market instruments.
  • Guideline 4: Classification as units in collective investment undertakings.
  • Guideline 5: Classification as derivative contracts.
  • Guideline 6: Classification as emission allowances.
  • Guideline 7: Classification as crypto-assets.
  • Guideline 8: Crypto-assets which are unique and not fungible with other crypto-assets.
  • Guideline 9: Hybrid crypto-assets.

Stakeholders have until 29 April 2024 to provide comments on the draft guidelines. Following that, ESMA will publish the finalised guidelines by the end of 2024.