ESMA Seeks MiCA Overhaul to Protect Investors and Tackle DeFi Risks

The European Securities and Markets Authority (ESMA) has submitted its recommendations to the European Commission on the review of Markets in Crypto-Assets Regulation (MiCA). ESMA wants to simplify the framework while improving investor protection and addressing innovative business models, such as decentralized finance (DeFi), staking, lending, and borrowing.

According to ESMA, stricter rules are needed for the marketing of crypto-assets, particularly when promoted by influencers and third parties. The regulator also suggests greater transparency in costs and proportionate requirements for staking, lending, and borrowing, including through disclosure obligations.

ESMA aims to strengthen supervisory powers and address risks arising from unauthorized services, online fraud, and non-compliant stablecoins. The regulator wants to enhance the EU's capacity to detect, block, and deactivate fraudulent websites and freeze crypto assets in cases of suspicion of market abuse or terrorist financing.