ESMA seeks fit check for crypto sector

Ahead of the launch of Europe’s new regulatory framework for the crypto sector, the region’s banking and securities regulators are consulting on proposed guidance for ensuring that the management of crypto issuers and platforms are up to the job.

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published a consultation paper on two sets of draft guidance — one on assessing the suitability of management at issuers of cryptoassets and at cryptoasset service providers, and the other focusing on large shareholders in, and prospective acquirers of, these kinds of firms.

“To foster and protect the integrity of the market in cryptoassets and related services and to promote trust, it is important to ensure that the members of the management body of issuers of [crypto tokens] and [service providers] as well as the persons that hold or wish to acquire qualifying holdings in them are suitable,” the consultation said.

The proposed guidance sets out criteria for assessing the knowledge, skills, experience and integrity of management personnel, and assessing the suitability of large shareholders.

The guidance, which is aimed at regulators, crypto firms and issuers, intends to reduce the risk of regulatory arbitrage while providing clarity and harmonizing the rules in this area, the consultation paper said.

For investors, the guidance is intended to increase confidence in the qualifications of management and major shareholders in crypto firms and issuers.

The consultation runs until Jan. 22, 2024.

The regulators plan to finalize the guidance by the time the new crypto rules take effect at the end of 2024.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.