EU Securities Watchdog ESMA Warns of Unregulated Crypto, Gold Investment Offerings

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The European Securities and Markets Authority (ESMA) has issued a warning regarding investments in assets like cryptocurrencies. They will remain unregulated in most countries until the EU’s Markets in Crypto Assets (MiCA) law is enforced across the Union, the regulator pointed out.

ESMA Highlights Risks Related to Unregulated Products and Services for Crypto and Other Assets

The European Union’s securities watchdog, ESMA, has issued a statement warning investors of risks arising from investment firms providing both regulated and unregulated products and services for crypto and gold, among other assets, as well as some non-transferable securities.

These usually fall outside the scope of the EU’s existing financial services regulation but are offered as alternatives to financial instruments. ESMA remarked that retail investors often rely on the reputation of a provider and advised companies on how they should act in such cases.

#ESMA warns investors of risks that arise when investment firms offer both regulated and unregulated products and/or services.

remind firms of the behaviours they are expected to adopt
firms may not benefit from regulatory protectionshttps://t.co/TT3CQFgeKspic.twitter.com/5CPrrbbvid

— ESMA – EU Securities Markets Regulator (@ESMAComms) May 25, 2023

The authority also noted that while MiCA is close to its full adoption, offered crypto assets will continue to be unregulated in most jurisdictions until the legislation enters into force throughout the EU, a process expected to complete in 2025.

ESMA is concerned that potential investors may be misled in terms of the level of protection they get, when unregulated products and services are offered in parallel, on the same website with regulated ones, and not fully aware of their nature and associated risks.

The watchdog recommends that investment firms “take all take all necessary measures to ensure that clients are fully aware of the regulatory status of the product/service they are receiving.” That includes clear disclosures when regulatory protections do not apply.

The information about the regulatory status of a product or a service should be “fair, clear and not misleading” and “effectively communicated in all dealings with clients,” ESMA suggests, while the companies should not use their own regulatory status for promotion purposes.

Do you think the European market for crypto investment products and services will grow with the adoption of MiCA? Share your expectations in the comments section below.