ESMA reinforces stricter laws for crypto companies outside EU

EU regulations on crypto business: The European Securities and Markets Authority (ESMA) has proposed stringent restrictions on cryptocurrency companies operating outside the EU, allowing them to directly serve customers within the bloc only under limited conditions. The move aims to prevent unfair competition and aligns with the EU's comprehensive rules for crypto markets, known as MiCA, which were approved last year. 

According to ESMA, third-country crypto firms can provide services to EU customers only when the client initiates the service exclusively, a concept known as 'reverse solicitation.' This exemption is considered narrow and exceptional, encouraging foreign firms to establish a presence within the EU. 

The proposal is open for public consultation until the end of April, with the final text expected by the end of 2024. ESMA underlined its commitment to actively protect EU-based investors and MiCA-compliant crypto-asset service providers from non-EU entities. The proposal also prohibits actual solicitation of business in the EU by third-country firms and outlines conditions for classifying crypto assets as "financial instruments" under MiFID rules.

(With Reuters inputs)