Regulations in Europe Mica require that crypto exchanges and other providers active in the European Union (EU) obtain a license. Take this scenario. I am based in the EU, and one of my friends outside Europe uses a Canadian cryptocurrency exchange that they think it’s great. They are so interesting that I decide to register. This exchange, let’s call them Fabdam, was not registered as a provider of cryptographic asset services (CASP) under regulations in IMCA Europe. It is because he is not interested in targeting Europeans, so he does not lead marketing in Europe.
So what should happen next? Visitors to Fabdam Geo-Block All visitors to the EU website? Or should it reject my request? Or is it acceptable to allow me to register?
The Mica regulations explicitly cover this situation in article 61 (see below). He says that I can register as a customer, provided that Fabdam is not part of a group that leads marketing or “solicit” in the EU. It’s because I approached Fabdam to my “Own exclusive initiative“.
However, Fabdam must be careful, as he still cannot market “new” types or services of cryptocurrencies or services. (We will come back to it).
Last week, the European Securities and Markets Authority (ESMA) published directives on the residents of the EU which register for foreign platforms, which is called “the exemption from reverse solicitation”.
Crypto lawyer Jonathan Galea de BCAS accused ESMA of overcoming, because he suggests that non-European providers should geo-blocker or reject requests. However, ESMA directives only made this suggestion under certain circumstances. The question is that these circumstances are very wide.
Based on these tips, there is a good chance that foreign crypto suppliers will block EU customers, because it is simply too much hassle. This limits the EU consumption options, while article 61 seemed to prevent it.
ESMA Guide concerning third-party crypto-country suppliers
Here is what Esma says:
ESMA recognizes that there are circumstances where companies in the third country could also be considered as requested by EU customers, but not exclusively. In such cases, the third-party country company can take precautionary measures to ensure that it does not violate the authorization requirements under the mica, refraining from providing crypto-active services to EU customers. To do this, the company of the third country may, for example, not accept new accounts of EU customers or geo-locking the means of access to its services or activities of CryptoAquaquet.
It is logical that the Fabdam exchange avoids attending events in Europe, and if you broadcast Internet advertisements, to ask the exclusion of EU jurisdictions. The challenge with ESMA’s advice is that it is so wide that if Fabdam does almost any type of marketing that could inadvertently in an EU resident, it should block residents of the EU. For example, if he does one of these things (not particularly targeting residents of the EU): issues a press release or hires an influencer who publishes on X or Youtube. The only thing that seems acceptable is that Fabdam has a website.
There are very few companies in the cryptographic sphere which are discreet in terms of marketing, but even they would probably fall because of these requirements.
The ESMA declares in the directives according to which “the exclusive initiative of the customer should be interpreted closely”, but is it so close that it is not practical in the Internet era?
To block or not block?
In other words, for the point of Mr. Galea, this almost means that any non-European crypto supplier should geo-locking EU applications or rejecting the EU, which is not the intention of the regulation. He wrote on LinkedIn:
“No reasonable person would be suitable that companies in the third country should geo-locking the EU And Prohibit all new users of the EU of registration in order to comply with the inverse solicitation exemption – because the very essence of this exemption must allow the possibility of a customer register for a service to their own exclusive initiative. “”
Peter Kerstens, the European Commission advisor involved in the writing of the Mica, sounded:
“In simple terms: if you are a non -EU cryptography service provider and you do not seek EU business, Mica simply does not apply to you. What is equivalent to solicitation is a question of facts and circumstances. But if you are a cryptographic service provider in a foreign country, taking care of your own business and doing nothing to attract EU business, and an EU person enters your virtual crypto and wants to buy your goods, there is nothing from the EU authorities or should do it. “”
He also noted that for all non -EU cryptography service providers, it will be difficult for the EU to take application measures if you have no presence or activity in Europe.
Post inscription, it’s so hard
The directives also cover the situation where an EU resident somehow manages to register for a non -European supplier in their own initiative. Article 61 indicates that the crypto supplier should not market different types of assets or services to EU residents.
If I had not read Esma’s advice, that’s what I could expect: after registering, the crypto supplier should probably avoid targeting me with most new promotions. I should therefore not see the windows of the website or obtain promotions by e-mail for other types of assets or services.
But since it is in my own initiative, I always expected to be able to exchange things on the stock market, provided that the exchange does not promote me. Regarding the “types” of assets, I would probably differentiate stablecoins, crypto and NFT.
ESMA has a different socket. He interprets the “types” very closely, differentiating the different stable coins (for example USD V Euro), blockchains, stablescoins compared to utility tokens and more. He probably also considers marketing more closely, but is a little less clear on this point. The two are important, but marketing is much more.
If I read the advice correctly, if I register and buy a stablecoin to an American dollar, the only thing I can do after registration is to buy other American stables on the same blockchain! I cannot buy a stablecoin from one dollar on another blockchain, I cannot buy a stablecoin euro, and I certainly cannot buy eth or bitcoin. I’m not even sure I can buy another stable dollar in the same blockchain.
If I am a customer, what matters as “my initiative”?
Most crypto exchanges display all trading pairs for users. Technically, it is an “offer”. Is it classified as their marketing for me? Is marketing defined as an explicit promotion or does it just allow me to see trading pairs?
If I am not allowed to see the trading pairs, should I send an e-mail to the exchange to allow me to see a commercial pair so that it is classified as my own initiative? It would not be practical.
Here are the relevant clauses of ESMA advice:
“This provision must therefore be interpreted as not allowing companies in the third country to offer the customer other crypto assets or crypto-active services or activities, even if these services or activities are same type as one (s) initially requested by the customer, unless it is proposed in the context of the Initial transaction. “”
We could be too severe on ESMA because we are less clear with regard to the “own initiative” with regard to registered customers:
“Companies in the third country should be able to provide recordings according to the relationship with the customer and, in particular, if the customer has taken the initiative to receive cryptographic asset services with regard to a new product.”
By backing down, there are two points of view. From the ESMA point of view, there are undoubtedly many non -European Crypto exchanges that will try to respect the rules. Their point of view must be recognized.
At the same time, there are competent residents of the EU, who may want to access their own exchanges at their own risk. Article 61 was addressed to this type of person, but ESMA directives seem to close this option wide.
When the EU introduced the GDPR for the first time, if it was incredibly frustrating because the EU residents were initially prevented from seeing a ton of foreign websites. It seems that it could happen soon in the cryptographic sphere.
Thumber article 61
Provision of crypto-actor services on the exclusive customer initiative
1. When a customer established or located in the union begins at his own exclusive initiative, the provision of a service or an activity of crypto-actor by a company of the third country, the obligation of authorization under article 59 does not apply to the supply of this crypto-active service or to the activity of the third country company at this service or an activity.
Without prejudice to intragroup relations, when a company in the third country, including through an entity acting on its behalf or having close links with such a company of the third country or any other person acting on behalf of this entity, requests customers or potential customers in the union, it should not be the means of communicating to be planned for the customer of the Union screen, it must not be
The second subparagraph applies notwithstanding any contractual clause or non-liability clause which claims to say otherwise, including any non-responsible clause or clause that the provision of services by a company in the third country is deemed to be a service provided on the exclusive customer initiative.
2.
3. ESMA owes by… (18 months after the date of entry into force of these regulations) of publication guidelines in accordance with article 16 of Regulation (EU) n ° 1095/2010 to specify the situations in which a third -country company is deemed to request established or located in the union. In order to promote convergence and promote coherent supervision with regard to the risk of abuse of this article, the ESMA also issues guidelines in accordance with article 16 of Regulation (EU) No 1095/2010 on supervision practices to detect and prevent the bypass of this regulations.
The author is not a lawyer. It is not legal advice.
