ESMA Proposes MiCA Changes to Strengthen Investor Protections and Supervisory Powers

The European Securities and Markets Authority (ESMA) has proposed changes to the Markets in Crypto-Assets Regulation (MiCA) to strengthen investor protections and supervisory powers. The proposals aim to simplify the framework while addressing emerging crypto activities, such as decentralized finance (DeFi) and stablecoins.

ESMA wants tighter safeguards for crypto-asset marketing, including promotions by influencers and third parties, and greater cost transparency. The regulator also recommends disclosure requirements for services such as staking, lending, and borrowing, covering potential risks, rewards, collateral, and losses.

ESMA is seeking stronger supervisory powers to address unauthorized firms targeting EU investors, online fraud, and stablecoins that do not comply with MiCA. The proposals include measures to tackle fraudulent websites, freeze crypto assets in certain cases, and prevent regulated firms from providing services linked to non-compliant stablecoins.

The regulator also called for clearer criteria for identifying genuinely decentralized activities and proposed a regulated service for firms giving users access to DeFi protocols. ESMA recommends harmonized crypto-asset classification, including for hybrid tokens, alongside simpler white-paper procedures and reduced regulatory duplication.