On 30 September 2026, the European Securities and Markets Authority (ESMA) published its response to the European Commission’s public consultation on the review of Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA). ESMA’s recommendations aim to remove legal uncertainty, prevent regulatory arbitrage, and ensure simplification and burden reduction for market participants, while strengthening investor protection and adapting the framework to rapidly evolving crypto-asset business models. The response covers seven key areas, summarized below.
Shortly afterwards, on 8 October 2026, ESMA also published an Opinion stating that CASPs should not provide crypto-asset services in relation to ARTs or EMTs that are not compliant with MiCA.1 In ESMA’s view, where a CASP offers a MiCA service involving a non-compliant stablecoin, the risk to clients lies not in the service itself but in the token. Because the token does not benefit from MiCA’s issuer-level safeguards, it carries risks that the CASP cannot properly identify, manage or mitigate with the tools available to it. ESMA therefore presumes that offering any MiCA service in relation to such a token breaches the CASP’s duty under Article 66(1) to act honestly, fairly and professionally in the best interests of its clients, since the CASP would knowingly expose clients to the risks created by the missing Title III and Title IV safeguards.
1. Strengthening Regulatory Coherence and Alignment with MISP
Following the end of the MiCA transitional period on 1 July 2026, ESMA acknowledges that MiCA has provided a solid framework for investor protection through its conduct, governance, and disclosure requirements. ESMA, however, also notes that investor protection under MiCA remains less comprehensive than under the traditional financial instruments framework, creating risks of duplicative requirements and legal uncertainty. ESMA calls for full alignment between the MiCA review and the Market Integration and Supervisory Package (MISP), particularly regarding the supervisory arrangements applicable to Crypto Asset Service Providers (CASPs).
2. Clarifying the Perimeter of MiCA
- Classification of crypto-assets: ESMA highlights that classification remains one of the most important issues under MiCA, particularly for hybrid tokens, fractionalized NFTs, and governance tokens. ESMA proposes that it be granted the ability to issue binding opinions on token classification, including on its own initiative, to promote supervisory convergence across the EU.
- Derivatives settled in stablecoins: ESMA considers that settlement in ARTs or EMTs should not prevent a derivative from qualifying as a financial instrument under MiFID II, and invites the Commission to clarify this point.
- Unauthorized stablecoins: ESMA recommends an explicit prohibition on CASPs providing any licensable service under MiCA in relation to ARTs or EMTs that are not MiCA-compliant, to eliminate interpretative ambiguity and ensure enforceability.
- Decentralised Finance (DeFi): ESMA calls for a clear definition of DeFi to be introduced directly in the legal text, with the DeFi exemption kept as narrow as possible to prevent “decentralisation washing”. ESMA also proposes a new regulated service for CASPs acting as gateways to DeFi protocols, subject to disclosure, transparency, conflict-of-interest, and cybersecurity obligations.
- Marketing practices: ESMA proposes a clear prohibition of certain problematic marketing techniques, stricter rules for influencers and third parties promoting crypto-assets, and specific powers to address third-country firms actively soliciting EU investors without authorization.
3. Streamlining the Current Framework
- White paper notification: ESMA recommends centralizing the Title II white paper notification process at ESMA level, removing the intermediary role of National Competent Authorities (NCAs), and clarifying the criteria for determining when a white paper has been "duly notified". The "duly notified" problem is that MiCA does not clearly provide when a notification counts as having been properly made. That moment matters, because it starts the clock for publishing the white paper and starting the offer. In practice we have seen some NCAs check content and format closely, asking for amendments or reject filings. In practice this works like an approval regime, even though MiCA rules approval out. Other NCAs simply accept the filing upon receipt as being “notified”.
- Simplification of authorization for transfer services: Under the current framework, investment firms can only provide crypto-asset services that are equivalent to the MiFID II investment services and activities they are already authorized for. Transfer services, meaning the movement of crypto-assets between distributed ledger addresses or accounts on a client’s behalf, have no MiFID II equivalent. On a strict reading, an investment firm relying on the notification route would therefore need a full CASP authorization, even though such transfers are inherent to the custody, execution or portfolio management services it already provides, resulting in duplicative supervision, additional cost and delay with seemingly no meaningful gain in investor protection. ESMA therefore proposes that investment firms already authorized under MiFID II and notifying under Article 60 of MiCA should not be required to obtain a separate CASP authorization solely for such transfer services that are intrinsically linked to their existing investment services.
- Prudential requirements: ESMA proposes to align CASP capital requirements with the IFR/IFD framework, including by deleting the restrictive list of deductible variable costs, to ensure a level playing field among entities providing services under multiple legislative frameworks.
4. Supervisory Powers
ESMA proposes enhanced supervisory tools, including:
- Explicit legal powers for NCAs to order the removal of scam or unauthorized websites.
- Direct powers for ESMA to require CASPs to immediately freeze crypto-assets where there are reasonable grounds for suspecting links to market abuse, money laundering, or terrorist financing.
- The ability for ESMA to adopt permanent product intervention measures (in addition to the existing temporary measures), ensuring a level playing field and simplifying regulatory responses to EU-wide issues.
5. Cost Transparency
ESMA has observed misleading cost information being displayed to investors, including claims of “zero commission” trading where high spreads in fact recoup or exceed the waived commissions. ESMA proposes that CASPs providing execution, reception and transmission of orders, and exchange services be required to provide full cost information to investors.
6. Expanding the Perimeter: Staking, Lending, and Borrowing
Staking involves locking up crypto-assets on a proof-of-stake blockchain to help verify transactions and keep the network secure, with holders earning rewards in return. MiCA does not treat staking as a crypto-asset service in its own right, so it captures the activity only indirectly where CASPs offer it to clients, in practice therefore typically on top of the custody activities.
As many will remember, the recitals of MiCA provide that the regulation does not cover lending and borrowing of crypto-assets, including e-money tokens, not to prejudice applicable national law. It was agreed that the feasibility and necessity of regulating such activities should be further assessed.
- Staking: ESMA invites the Commission to clarify that staking services provided by CASPs should be subject to targeted conduct, disclosure, and safeguarding requirements, while distinguishing between self-directed staking, technical staking, pooled or custodial staking, and liquid or yield-bearing staking products. Enhanced disclosures on rewards, lock-up periods, slashing risk, validator selection, fees, and insolvency treatment would be required.
- Lending: ESMA flags that crypto lending programs are “effectively black boxes for clients” and proposes that CASPs offering lending be subject to specific rules, including client written consent, disclosure requirements, and collateral rules.
- Borrowing: ESMA proposes targeted conduct, disclosure, and risk-management requirements for CASPs facilitating borrowing, particularly where services involve retail clients or leverage. Requirements would cover collateral, liquidation mechanisms, rehypothecation, and insolvency treatment.
7. Tokenized Capital Markets
More broadly, ESMA sees a need for a framework for tokenized securities and on-chain settlement to support the development of an integrated European tokenized capital market and facilitate cross-border activity. In ESMA’s view, the EU should adopt clearer rules for tokenizing existing securities and provide reliable on-chain settlement options. ESMA suggests that, over time, an optional EU-level “28th regime” could establish a consistent basis for issuing, transferring, and settling tokenized securities across Member States.
8. Conclusions for Market Players
ESMA’s response is not binding but is ESMA’s contribution to the European Commission’s consultation on the MiCA review. It will be for the Commission to decide whether to take the proposals forward in a legislative proposal, which would then need to be agreed by the European Parliament and the Council. That said, as the authority responsible for supervisory convergence under MiCA, and potentially the future direct supervisor of CASPs under the MISP, ESMA’s views are likely to carry significant weight in shaping the review. If adopted, the proposals could significantly expand the regulatory perimeter for crypto-asset services and introduce new obligations for CASPs operating in or providing services into the EU. Market participants should follow the review closely and, in particular, consider:
- The potential impact of binding classification opinions and the narrowing of the DeFi exemption on their product offerings and business models.
- Possible new compliance obligations relating to staking, lending, and borrowing services.
- Possible stricter rules around unauthorized stablecoins that could affect the range of assets available on their platforms.
- Possible simplification of authorization and prudential requirements for MiFID II firms notifying under MiCA.
The European Commission’s consultation on the MiCA review closed at the end of September 2026, and the Commission is now analyzing the feedback received in preparing its formal review report. We will continue to monitor developments and provide further updates.
Footnote
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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