> For the complete documentation index, see [llms.txt](https://www.headlesslaw.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://www.headlesslaw.com/mica/level-3/reports-and-advice/esma75-113276571-1721-response-to-ec-consultation-mica-review.md). # ESMA75-113276571-1721 — Report — Response to the Commission's MiCA review consultation \[published] *Published · ESMA publication, 30 September 2026 ·* [*Official source*](https://www.esma.europa.eu/sites/default/files/2026-09/ESMA75-113276571-1721_Response_to_the_EC_consultation_MiCA_regulation_review.pdf) | | | | ----------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **Authority** | ESMA | | **Reference** | ESMA75-113276571-1721 | | **Date** | 30 September 2026 | | **Document type** | Report ([ESMA document page](https://www.esma.europa.eu/document/response-european-commissions-consultation-review-mica-regulation)) | | **Title on the ESMA document page** | Response to the European Commission's consultation on the review of MiCA regulation | | **Press release** | [ESMA calls for changes to make MiCA clearer, safer and ready for emerging services](https://www.esma.europa.eu/press-news/esma-news/esma-calls-changes-make-mica-clearer-safer-and-ready-emerging-services) (30 September 2026) | | **Consultation** | [Commission — Targeted consultation on the review of MiCA Regulation](/mica/level-3/consultations/targeted-consultation-review-of-mica.md) (20 May – 31 August 2026) | | **Review provision** | [Article 140 MiCA — Reports on the application of this Regulation](/mica/articles/140.md) | **ESMA Response to the EC Consultation on the review of Regulation (EU) 2023/1114 (MiCA)** ### 1. Executive Summary This Paper sets out ESMA’s key observations and policy proposals in the context of the consultation on the review of Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA). Drawing on ESMA’s initial implementation experience, it identifies areas where targeted amendments, clarifications or further provisions may strengthen the effectiveness and the overall coherence of the EU regulatory framework for crypto-assets. ESMA believes that the review should focus on removing legal uncertainty and preventing regulatory arbitrage, ensuring whenever possible simplification and burden reduction for the market participants. The revisited framework should bring clearer token classification, more effective supervision of cross-border risks including stronger convergence tools for ESMA, and better alignment between MiCA and MiFID II while ensuring consistency with the forthcoming Market Integration and Supervisory Package. ESMA’s proposals intend to avoid fragmentation, duplication and inconsistent supervisory practices, ensuring that similar risks are subject to comparable regulatory outcomes across the EU financial system. MiCA should also be updated to address the rapid evolution of business models, including Crypto Asset Service Providers (CASPs) acting as gateways to Decentralised Finance and Protocols (DeFi), staking, lending and borrowing services, misleading marketing practices and unauthorised stablecoins. These areas require proportionate but clear obligations focused on investor protection, market integrity, transparency and enforceability. In particular, ESMA proposes: * New regulated services for CASPs acting as gateways to DeFi. * Enhanced supervisory powers and empowerment to issue binding opinions on token classification. * Streamlined white paper notification procedures, simplified authorisation requirements for transfer services, and greater alignment of prudential requirements with other regulatory frameworks. * Targeted requirements for staking, lending, and borrowing services. * Enhanced investor protection measures such as marketing practice restrictions and cost transparency. * Stricter rules against the provision of CASP services in respect of unauthorized stablecoins. ### 2 Strengthening regulatory coherence and the interplay with MISP 1 July 2026 marked the end of the MiCA transitional period. Through its supervisory convergence activities, ESMA has observed National Competent Authorities (NCAs) taking steps, both in authorisation processes and in ongoing supervisory activities, to ensure that CASPs put in place robust arrangements to protect investors and mitigate potential risks to financial stability. Throughout this period, ESMA's primary objective has been to promote supervisory convergence across the Union, thereby contributing to a level playing field for market participants and ensuring a consistent level of investor protection. ESMA's experience to date suggests that MiCA provided a solid framework for investor protection through its conduct, governance and disclosure requirements applicable to CASPs. However, the level of investor protection under MiCA remains less comprehensive and distinct from the regulatory framework applicable to traditional financial instruments. This distinction and the co-existence in the crypto space of traditional financial services providers and entities specialised in services in crypto-assets create the risk of duplicative requirements and legal uncertainty, thereby increasing the burden on firms and reducing investor protection in crypto-assets. ESMA invites the Commission to consider these regulatory frictions when assessing the effectiveness of the EU rulebook in its MiCA review. ESMA considers it important to ensure full alignment between the MiCA review and the Market Integration and Supervisory Package (MISP), particularly regarding the supervisory arrangements applicable to CASPs, including where a CASP belongs to financial groups for which consolidated supervision applies. Although CASPs supervision falls outside the scope of the present consultation, any amendments to the substantive framework applicable to CASPs, for example, concerning the scope of crypto-asset services, conduct requirements or prudential obligations, should be considered in a manner that preserves the coherence and effectiveness of the overall framework, particularly if the MISP proposal results in changes to the allocation of supervisory responsibilities between ESMA and NCAs in respect of CASPs. ### 3 Clarifying the perimeter of MiCA #### 3.1 Classification of crypto assets ESMA’s implementation experience suggests that classification remains one of the most important issues under MiCA, as questions frequently arise at the boundary between: (i) crypto-assets in scope of MiCA and financial instruments under MiFID II; (ii) ARTs and EMTs; and (iii) crypto-assets in scope of MiCA and assets outside MiCA altogether (such as certain NFTs or non-transferable tokens, or “technical tokens” like wrapper for instance). These questions are particularly acute for crypto-assets with hybrid, embedded, or economically significant features that may not be fully reflected in their legal or technical classification (e.g. hybrid tokens, fractionalised NFTs, certain wrapped or tokenised arrangements and governance tokens). Divergent classification outcomes across Member States may encourage forum shopping and create an uneven playing field for issuers, offerors and CASPs. The existing ESMA and Joint ESAs guidelines on the qualification of crypto assets as financial instruments[^1] acknowledge that classification requires a case-by-case assessment, that all attributes of the token must be considered and that competent authorities should apply a substance-over-form approach. The guidelines have proven to be a good basis for conducting the necessary assessments. **Clarity in L1 and ESAs non-binding opinions on the classification of crypto-assets** MiCA offers NCAs the possibility to request an ESA opinion on classification issues. [Article 97(3)](/mica/articles/97.md) of MiCA provides that competent authorities may request ESMA, the EBA or EIOPA, as appropriate, for a non-binding opinion on the classification of a crypto-asset, including whether it falls outside the scope of MiCA (and falls under MiFID II instead). ESMA has so far only issued one non-binding opinion upon the request of an NCA. ESMA is concerned that the non-binding nature of such opinions is not, in itself, sufficient to ensure supervisory convergence across the EU. In addition, the ESAs may issue opinions only upon request from an NCA, which further constrains the effectiveness of this mechanism in fostering consistent supervisory outcomes across the Union. Hence, ESMA proposes that EC provides legal certainty about the classification of crypto assets in MiCA L1 and that introduces a mechanism for ESMA, in consultation with EBA or jointly, to issue binding opinions for the classification of tokens, including on ESMA’s own initiative in case recurring patterns are observed across the EU. The latter proposal would promote supervisory convergence in relation to innovative types of tokens, including “hybrid” tokens (which combine multiple functions) and complex structures, such as fractionalised NFTs. While still based on a case-by-case and substance-based assessment of crypto-assets, the binding nature of the opinion would give to ESMA and EBA additional powers to foster convergence in an effective way. **Derivatives settled in stablecoins** ESMA considers that greater legal clarity is needed regarding the treatment of derivatives settled in ARTs and EMTs. Under MiFID II, derivatives are generally classified according to whether they are physically settled or cash settled. However, the legislation does not expressly address derivatives settled in stablecoins. ESMA is of the view that settlement in ARTs or EMTs should not prevent a derivative from qualifying as a financial instrument under MiFID II. Clarifying this point in the legislative framework would promote legal certainty, support supervisory convergence and reduce the risk of regulatory arbitrage. Acknowledging that settlement risks are specific to each settlement asset, ESMA invites the Commission to consider clarifying the treatment of derivatives settled in ARTs, EMTs or in other types of crypto assets under MiFID II. #### 3.2 Unauthorised Stablecoins The entry into application of MiCA represents a fundamental development in the establishment of a single rulebook for the regulation and supervision of issuance, offer to the public and admission to trading and provision of services in relation to crypto-assets. Persons who intend to offer or admit to trading a stablecoin in the EU must obtain an authorisation from their NCA. The MiCA prohibition on offering unauthorised stablecoins to the public or seeking their admission to trading may also extend to the provision of certain crypto-asset services where those services amount, in practice, to a seeking of admission to trading. This clarification has been provided by the European Commission's Q\&A 2404 on the circumstances in which services provided in or into the Union may constitute an offer to the public, a seeking of admission to trading, or a placing of an ART or EMT[^2], together with ESMA's Public Statement on the provision of certain crypto-asset services in relation to non-MiCA-compliant ARTs and EMTs (unauthorised stablecoins). ESMA has observed that the current framework gives rise to uncertainty regarding the extent to which authorised CASPs may continue to facilitate the availability, use or trading of unauthorised stablecoins. Such uncertainty risks undermining supervisory convergence across the EU by fostering divergent interpretations and supervisory practices, leading to inconsistent levels of investor protection and creating an unlevel playing field. In addition, the absence of a clear prohibition on the provision of crypto-asset services in relation to unauthorised stablecoins reduces the effectiveness of MiCA, creates disparities between compliant and non-compliant issuers, facilitates regulatory arbitrage, and hinders effective supervisory oversight and enforcement. To achieve legal clarity, ESMA invites the Commission to amend the Regulation explicitly providing that a CASP cannot provide any licensable service under MiCA in relation to ARTs or EMTs that are not compliant with the applicable requirements under MiCA. This amendment should eliminate interpretative ambiguity, create a binary supervisory test, which would ensure enforceability, and avoid creating any divergence between the definition of offer to the public in MiCA with the definition used in other EU regulations. #### 3.3 Decentralised Finance (DeFi) ESMA has observed divergence of views in the EU regarding the notion of “full decentralisation” within the meaning of [Recital 22](/mica/recitals/22.md) of MiCA. This legal uncertainty has increased the risk of “decentralisation washing”, where an identifiable operator relies on DeFi-type language to avoid MiCA obligations. It also creates opportunities for regulatory arbitrage, with services and arrangements being structured in a manner intended to fall outside the scope of existing MiCA categories. For these reasons, greater legal certainty is needed regarding the circumstances in which a crypto-asset service, trading protocol or decentralised exchange (DEX) may be considered to be provided in a “fully decentralised manner without any intermediary”. Therefore, ESMA invites the EC to amend MiCA directly introducing in the legal text a clear definition of DeFi to overcome the uncertainty currently embedded in [Recital 22](/mica/recitals/22.md). In ESMA view, the ‘DeFi’ exemption should be as narrow as possible to avoid being used as a way of circumventing the application of the MiCA regime. As an alternative, the EC could consider addressing the issue by empowering ESMA to issue technical guidelines; this approach may enable the consistent application of the framework across the Union, provide legal certainty to market participants and supervisors, and accommodate technological developments without the need for frequent legislative intervention. #### 3.4 New crypto assets services (access to DeFi services) During the early phase of MiCA implementation, ESMA has observed the development of business models where authorised CASPs facilitate client access to DeFi products or protocols (including DEXs, lending and borrowing protocols, staking and re-staking mechanisms, liquidity provision protocols, yield-generating strategies) or provide a user interface to interact with smart contracts that are unregulated. These business models may raise important risks in terms of consumer protection, operational and smart-contract risk, as well as conflicts of interest (where CASPs may route client activity to specific protocols). In order to address potential conflicts of interest and protect investors, ESMA proposes to introduce a new regulated service on crypto assets covering the provision of access to decentralised protocols or DeFi services by a CASP on behalf of clients. Such a “gatekeeper” service could cover situations where a CASP: * provides a technical interface enabling clients to interact with DeFi protocols, * facilitates transaction routing or interaction with smart contracts or otherwise acts as an intermediary between clients and decentralised financial services. In such cases, the CASP would act as a regulated gateway through which clients have access to DeFi services[^3]. The Regulation could clarify that where a CASP performs such a role, it should be subject to appropriate obligations, including disclosure of risks associated with DeFi protocols; transparency regarding protocol selection and routing practices; management of conflicts of interest; due diligence on protocols made available through the interface; operational and cybersecurity safeguards. The proposal would improve the legal certainty regarding the regulatory treatment of CeFi-DeFi hybrid models; strengthen consumer protection where retail users get access to DeFi through intermediaries; ensure consistent supervisory approaches across Member States; and allow innovation in decentralised finance within a regulated and transparent environment. Indeed, the proposal would preserve innovation by recognising that open-source development, self-custody, automated smart contracts and permissionless infrastructure should not automatically amount to regulated intermediation. ESMA proposes that the new obligations should remain proportionate to the level of control exercised by the CASP over the underlying protocol, to limit the additional costs on market players. #### 3.5 Marketing practices ESMA has observed extensive and disputable marketing activities regarding crypto assets. As MiCA provisions relating to marketing communications are very high level, it is difficult for NCAs to take enforcement actions and to apply MiCA marketing rules to influencers/third parties without explicit L1 provisions. Moreover, while in case of false or misleading information MiCA Market Abuse provisions apply, if the information is neither of them, as it simply refers to recommendations or predictions, MiCA does not offer any enforcement tools to Supervisors. In ESMA’s view, a clear prohibition of certain marketing techniques proven to be particularly problematic would ensure clarity for the industry, facilitate enforcement actions by NCAs and would enhance retail investor protection. For this reason, ESMA invites the EC to further reflect on banning certain marketing practices or limiting these practices for certain types of crypto-assets, in line with the approach in MiFID II. Conflict of interests’ disclosure or transparency of previous recommendations may also be explored. In addition, it is also difficult for NCAs to apply MiCA marketing rules to influencers and third parties promoting crypto-assets on behalf of issuers and CASPs as MiCA does not apply to them. ESMA proposes that MiCA introduces some obligations for influencers and third parties promoting crypto-assets and crypto-asset services and gives corresponding powers for NCAs that would facilitate NCAs’ supervision and enforcement actions relating to such marketing practices. Finally, supervisors should be given specific powers to address third country firms which actively solicit EU investors without being authorised under MiCA, to ensure that the reverse solicitation exemption provided for in [article 61](/mica/articles/61.md) is interpreted consistently and in as narrow a way as possible. ### 4 Streamlining the current framework #### 4.1 Title II White Papers The white paper notification regime set out in Title II of MiCA[^4] obliges offerors and persons seeking admission to trading to notify their white papers to an NCA before they may publish the white paper and subsequently offer a crypto-asset to the public. MiCA also imposes a short (five-working-day) deadline for submissions to the ESMA white paper register which renders a review of each white paper for basic compliance with MiCA requirements impractical. The absence of a formal approval regime, together with the lack of clear criteria for NCAs to determine whether a white paper has been ‘duly notified’, may result in low-quality information being provided to investors. ESMA recommends that the Commission clarify the criteria for determining when a white paper has been “duly notified” and centralise the Title II white paper notification process at ESMA, thereby removing NCAs from their intermediary role. This approach would improve efficiency by building on the technical validation already performed through ESMA’s white paper register, which covers a substantial part of the checks required to verify completeness and compliance with formatting requirements. #### 4.2 Simplification of authorisation for transfer services ESMA\_QA\_2071 provided clarification on whether a transfer of crypto-assets that is performed as an ancillary component of another crypto-asset service should be regarded as part of that service and therefore not require a separate authorisation and whether such transfers would nonetheless remain subject to the requirements of [Article 82](/mica/articles/82.md) MiCA[^5]. The EC clarified that the provision of transfer services for crypto-assets is a distinct and self-standing crypto-asset service within the meaning of [Article 3(1)(16)(j)](/mica/articles/3.md) and [Article 3(1)(26)](/mica/articles/3.md) MiCA. The Commission further stated that where an activity falls within the definition of a transfer service, it remains subject to the authorisation requirements under [Article 59](/mica/articles/59.md) MiCA, even if it is provided as part of another crypto-asset service. Consequently, both the authorisation requirements applicable to transfer services and the obligations set out in [Article 82](/mica/articles/82.md) MiCA apply. ESMA’s supervisory convergence initiatives have highlighted concerns regarding the proportionality of this outcome, noting significant practical implications to investment firms seeking to provide crypto-asset services under MiCA. Under [Article 60](/mica/articles/60.md) of MiCA, investment firms authorised in terms of MiFID II (and other entities authorised under legislation other than MiCA) may provide certain crypto-asset services through a notification procedure rather than a full CASP authorisation. However, even where such firms provide services that are equivalent to investment services already authorised under MiFID II (or to the services which they are authorised to provide under their primary legislation), the firm would need to obtain a separate CASP authorisation in order to provide transfer services. In practice, the requirement for a separate CASP authorisation creates a substantial regulatory and administrative burden for investment firms that are already authorised under MiFID II and that access the MiCA regime through the notification mechanism provided in [Article 60](/mica/articles/60.md). This burden includes the costs associated with obtaining an authorisation as well as the additional ongoing operational, regulatory, and supervisory costs. At the same time, the benefits of such an additional authorisation appear difficult to justify where the transfer service is intrinsically linked to the equivalent investment service. In these cases, the relevant investor protection, organisational governance, risk management and supervisory safeguards are already embedded within the firm's existing regulatory framework and ongoing supervision. Thus, ESMA proposes to clarify in MiCA that the authorisation for transfer services equivalent to investment services already authorised under MiFID II for investment firms which notify per [Article 60](/mica/articles/60.md) the provision of crypto assets services does not require these firms to apply for a license also under [Article 63](/mica/articles/63.md) of MiCA. #### 4.3 Prudential Requirements Through its supervisory convergence work, ESMA has observed concerns among NCAs that the current capital requirements do not sufficiently capture differences in the risk profiles of CASPs arising from the scope of services provided or from their legal and group structures (for example, where a group operates under a single authorisation as opposed to multiple licences). In addition, the current regime may not be fully consistent with capital requirements applicable under other EU financial services legislation. In particular, the current prudential requirements do not distinguish between the risks stemming from an entity solely providing one Class 3 crypto-asset service and those stemming from an entity providing all crypto-asset services (all else, fixed costs, remaining equal). Additionally, an entity authorised under MiCA and under MiFID (or another framework) is required to comply with each legislation’s prudential requirements. However, if an entity providing services under MiFID provides crypto-asset services based on a MiCA notification, there is no change to the prudential requirements applicable (everything else, fixed costs in particular, remain equal). Finally, [Annex IV](/mica/annexes/annex-iv.md) in relation to the minimum prudential requirements applicable to Class 2 and 3 services does not make clear if the provision of a Class 2 or 3 service alone justifies the corresponding prudential requirement (it currently reads like the prudential requirement associated with Class 2 services is only activated if both a Class 1 and a Class 2 service is provided). ESMA proposes to align capital requirements for CASPs with IFR/IFD (i.e. delete the limitative list of variable costs that can be deducted for the purpose of the calculation of total fixed overheads so that further variable costs can be deducted in line with IFR/IFD requirements). This would help ensuring a level playing field among entities providing services under multiple legislations, including notifying entities and CASPs (with reference to IFR/IFD, MiFID) . ### 5 Supervisory Powers #### 5.1 Supervisory powers and tools against unauthorised service providers or suspicious activity ESMA considers that certain additional areas should be within the supervisory perimeter in order to ensure that supervisory powers are fully effective. The cross-border nature of online fraud entails that fraudulent domains may be registered, hosted and promoted outside the jurisdictions in which victims are located, notably in non-EU jurisdictions. This creates significant challenges for NCAs in effectively addressing fraud and scams at national level and requires a patchwork of enforcement actions to ensure a convergent level of investor protection across the EU. To combat fraud and scams, ESMA proposes that NCAs could be assigned explicit legal powers to order the removal of scam or unauthorised websites. The allocation of clear powers granted to NCAs at national level, would enhance the EU’s capacity to detect, block and deactivate fraudulent websites, thereby providing quicker, more consistent and more effective protection to EU retail investors. In addition, where there are reasonable grounds for suspecting that specific crypto-assets are linked to market abuse or to other financial crime, money laundering or terrorist financing, ESMA proposes that ESMA, in addition to clear powers granted to NCAs at national level, is assigned direct powers to require the relevant crypto-asset service provider to immediately freeze these crypto-assets as long as needed for the proper investigation and enforcement by national enforcement authorities and relevant competent authorities under Directive (EU) 2015/849. The objective is to ensure that CASPs react quickly in case of suspicions that specific crypto-assets are linked to financial crime, money laundering or terrorist financing, thus preserving evidence and assets during investigations led by other authorities such as AML competent authorities and national police. Because of current lengthy procedures, when the freezing of suspicious crypto assets (linked to criminal activities) is requested, it is often too late and the assets have disappeared. This proposal would also be useful to avoid that ESMA (if/ when it becomes supervisor of CASPs) finds itself in a situation where it would not have the means to help in the fight against these criminal activities. #### 5.2 Product intervention powers Experience under MiFID II has shown that product intervention is a powerful and effective tool for ESMA and NCAs, despite being subject to significant legal constraints. However, the adoption of temporary ESMA product intervention measures, followed by repeated short-term renewals, is a lengthy and unnecessarily burdensome process. Requiring all Member States to adopt permanent national measures replicating ESMA’s measures, together with the publication of an ESMA opinion on each national measure, also creates excessive regulatory complexity. Given the digital and cross-border nature of crypto-assets, fragmented national measures are unlikely to provide an effective response unless all NCAs act consistently. ESMA thus proposes to introduce the possibility for ESMA to take permanent product intervention measures (in addition to the temporary measures already allowed to ESMA, and similarly to the power to take permanent national measures granted to NCAs), whether the MISP proposal to transfer CASP supervision to ESMA is adopted or not. The proposal would ensure better investor protection across the EU once an EU wide issue emerges, ensuring a level playing field in dealing with such an issue and simplification of the regulatory model (i.e. the same measures, once agreed at ESMA level, should not need to be replicated in each jurisdiction, with new burdensome national processes). If the MISP proposal is not adopted, separate enforcement powers would have to be granted to ESMA solely for this purpose. ### 6 Cost transparency ESMA has witnessed misleading costs’ information being displayed to investors. For instance, some CASPs providing exchange services claim zero commission trading and tight spreads when the spread applied is in fact high and allows the CASP to recoup or even exceed the loss coming from the “zero commission” trading. ESMA proposes to introduce requirements for CASPs providing execution, RTO and exchange services to provide full cost information to investors. In ESMA’s view, clients should be duly informed of the cost components associated with their transactions in crypto-assets, because this will allow them to make better informed decisions and compare prices on different platforms. The proposal enhances investor protection by making it easier for clients to identify and challenge misleading claims about low fees or costs. ### 7 Expanding the perimeter of application to address innovation and risks #### 7.1 Staking While recognising that staking is a core technical function of Proof of Stake (PoS) DLTs and should not automatically be treated as lending or portfolio management, ESMA is aware of key investor-protection risks associated with staking arrangements. Marketing materials may, for example, emphasise the possibility of earning staking rewards while downplaying the associated risks, potentially leading investors to form unrealistic expectations regarding returns, or the safety of the service or the liquidity of their assets. Investors may also not fully understand slashing risks, whereby a portion of the staked assets can be lost as a result of validator misconduct, operational failures or breaches of protocol rules, or liquidity risks arising from lock-up periods that restrict the ability to access or dispose of assets. In addition, unclear asset segregation arrangements may create uncertainty as to whether clients' assets would be protected in the event of the insolvency of the service provider. Finally, where key staking functions rely on third-country infrastructure or entities, investors may be exposed to additional operational, legal and supervisory risks, including difficulties in enforcing their rights or obtaining redress. These risks may impair investors' ability to make informed investment decisions and warrant appropriate safeguards and disclosures. For these reasons, ESMA invites the Commission to clarify in MiCA that staking services provided by authorised CASPs should be subject to targeted conduct, disclosure and safeguarding requirements, without automatically treating staking as equivalent to lending or investment management. The regime should distinguish between: (i) self-directed staking with no intermediary; (ii) technical staking services; (iii) pooled or custodial staking; and (iv) liquid or yield-bearing staking products potentially raising separate classification issues under MiCA, MiFID II or other EU frameworks. The nature and intensity of the risks, as well as the appropriate regulatory treatment, depend on the degree of intermediation, control over clients’ assets, pooling and discretion exercised by the service provider. While self-directed staking does not involve a regulated intermediary, custodial or pooled arrangements may give rise to safeguarding, governance, conflicts-of-interest and insolvency risks. Similarly, where staking results in the issuance of a separate liquid or yield-bearing token, the relevant product may require an independent classification assessment under the applicable EU regulatory framework, taking into account the specific features of the agreement. For CASP-provided staking, MiCA should require enhanced staking disclosures, including on rewards, lock-up and unbonding periods, slashing risk, validator selection, fees, operational dependencies and insolvency treatment. Additional governance, conflict-of-interest and risk-management requirements should apply where CASPs exercise discretion over validator selection, pool client assets or use affiliated or third-country entities. The proposal would provide legal certainty, helping to distinguish staking from crypto lending, while recognising that the two may converge where CASPs reuse or rehypothecate client assets to generate yield. The preferred approach should therefore remain proportionate and focused on CASPs intermediating, pooling or marketing staking services, rather than introducing a new heavy authorisation regime. #### 7.2 Lending and borrowing **Lending** ESMA has observed that crypto lending can cause cascading failures due to CASPs borrowing crypto-assets from clients (sometimes without collateral) and on-lending them to third parties. When CASPs retain part of the generated yield and pass on the rest to clients, this introduces significant risks because MiCA requirements - such as custody and asset segregation - no longer apply once crypto-assets are lent out. Clients opting into these programs are often not informed about critical details, such as the identity and creditworthiness of the ultimate borrowers, the allocation of loans by the CASP, the amount and type of collateral posted (if any) and the general loan conditions and gross yield generated. These programs are effectively black boxes for clients, who entrust their assets in exchange for uncertain returns. ESMA invites the Commission to clarify in MiCA that CASPs offering or facilitating lending should be subject to a number of rules when offering lending services (client express written consent, disclosure requirements, etc.). ESMA’s proposal is not to create a newly regulated service requiring authorisation and being subject to conduct of business rules (disclosures, collateral rules, limit on yield retained by the CASP, etc). **Borrowing** ESMA has identified a key investor-protection gap in the perception that borrowing appears as a simple liquidity tool, while it can expose clients to rapid liquidation, leverage, collateral volatility, smart contract risk and opaque reuse of collateral, particularly where retail clients increase trading exposure through borrowed assets. ESMA invites the Commission to clarify in MiCA that CASPs offering or facilitating borrowing should be subject to targeted conduct, disclosure and risk-management requirements, particularly where services are offered to retail clients or involve leverage. The regime should remain proportionate and focused on CASPs intermediating or facilitating borrowing services, rather than attempting to regulate autonomous protocols directly. It would distinguish between: (i) collateralised borrowing; (ii) margin or leveraged borrowing linked to trading; (iii) borrowing through DeFi protocols accessed via a CASP; and (iv) more complex arrangements involving rehypothecation or recursive leverage. Such distinction is not intended to establish mutually exclusive or hierarchical categories, but rather to identify the legally and economically relevant features of borrowing arrangements that may generate different, and potentially cumulative, risk profiles. It would therefore provide a basis for calibrating the applicable requirements in a proportionate manner. Disclosure obligations would include collateral, liquidation mechanisms, rehypothecation, affiliated counterparties, protocol risks and insolvency treatment, as well as a clear explanation of the risks of automatic liquidation and losses exceeding posted collateral. The proposal would address investor protection risks, while also helping to distinguish borrowing from custody and staking, as clients’ legal and economic position may change significantly once assets are pledged or reused. ### 8 A credible pathway towards scalable tokenised capital markets ESMA is of the view that the EU should adopt clearer rules for tokenising existing securities and provide reliable on-chain settlement options. Scaling tokenisation across the Single Market will depend as much on legal and institutional reform as on technological development. Persistent uncertainty concerning issuance, legal title, custody, settlement finality and cross-border enforceability risks creating separate national or technological silos. A coherent legal framework should therefore support interoperability between DLT systems and traditional infrastructures, promote asset portability and liquidity, and prevent tokenisation from reproducing existing market fragmentation in a new form. Over time, as demand for DLT-native issuances develops, an optional EU-level 28th regime could establish a consistent basis for issuing, transferring and settling tokenised securities across Member States without requiring immediate harmonisation of every relevant area of national law. A 28th regime could also cover cases in which DLT is used for existing legacy arrangements. The regime should focus on the core areas where harmonisation is necessary to enable cross-border activity. [^1]: [ESMA75453128700-1323 Final Report on the Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments](https://www.esma.europa.eu/sites/default/files/2024-12/ESMA75453128700-1323_Final_Report_Guidelines_on_the_conditions_and_criteria_for_the_qualification_of_CAs_as_FIs.pdf) [^2]: [ESMA\_QA\_2404](https://www.esma.europa.eu/publications-data/questions-answers/2404) [^3]: [In ECB’s study on DeFi, ECB puts emphasis on the presence at certain points of regulated entities or relevant actors to regulate. Who to regulate? Identifying actors within DeFi’s governance](https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3208~051a880042.en.pdf) [^4]: The scope of Title II includes crypto-assets that do not qualify as ARTs and EMTs. [^5]: [ESMA\_QA\_2071](https://www.esma.europa.eu/publications-data/questions-answers/2071) --- # Agent Instructions This documentation is published with GitBook. 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