The European Securities and Markets Authority has responded to the European Commission’s review of the Markets in Crypto-Assets Regulation with proposals to strengthen investor protection, close regulatory gaps and simplify requirements. Drawing on its initial implementation experience and earlier work on risks in decentralised finance, crypto lending and staking, ESMA calls for tighter controls on marketing by firms, influencers and other third parties, full cost disclosures for execution and exchange services, and proportionate safeguards for staking, lending and borrowing. These would cover risks, rewards, fees, collateral, liquidation, asset reuse and potential losses. The recommendations would clarify when decentralised finance activities are genuinely decentralised and create a regulated service for crypto-asset service providers that give clients access to DeFi protocols. ESMA also seeks binding powers over token classification, including for hybrid tokens, an explicit ban on regulated firms providing services involving noncompliant stablecoins, and stronger tools against unauthorised third-country firms and fraudulent websites. Proposed enforcement powers include freezing crypto-assets suspected of links to market abuse, money laundering or terrorist financing and allowing ESMA to impose permanent product intervention measures. To reduce burdens and inconsistent treatment, ESMA proposes centralising certain white paper notifications, removing duplicative transfer-service authorisations for some firms already regulated under the Markets in Financial Instruments Directive II, and aligning prudential requirements more closely with other EU frameworks. Beyond the immediate MiCA review, it advocates clearer rules for tokenised securities and on-chain settlement, potentially including an optional EU regime supporting cross-border issuance, transfer and settlement.

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