The European Securities and Markets Authority (ESMA) has proposed amendments to the markets in crypto-assets regulation (MiCA) in response to the European Commission’s consultation on the framework.
The recommendations aim to simplify MiCA, strengthen investor protection and address services including decentralised finance (DeFi), staking, lending and borrowing.
ESMA has proposed a new regulated service for crypto-asset service providers (CASPs) that give clients access to DeFi protocols. It has also called for clearer criteria for when a service counts as fully decentralised, to stop operators using DeFi structures to avoid MiCA.
The regulator also wants binding rules on token classification and clarity that stablecoin-settled derivatives can still qualify as financial instruments under Mifid II.
On investor protection, ESMA has proposed stricter marketing rules, including for influencer promotion, greater cost transparency and proportionate requirements for staking, lending and borrowing, backed by mandatory disclosures.
Read more: ESMA signals end of MiCA grace period
With regards to supervision, ESMA has proposed powers to act against unauthorised third-country firms, block fraudulent websites and freeze crypto-assets, as well as a ban on regulated firms servicing stablecoins that do not comply with MiCA.
To simplify the regime, it has suggested reducing crypto white paper notification procedures, removing duplicate authorisation requirements and harmonising prudential standards.
Beyond the MiCA review, ESMA has called for a framework covering tokenised securities and on-chain settlement, including cross-border activity.
The recommendations follow the end of MiCA’s transition period on 1 July 2026. CASPs without authorisation by that date were required to wind down their activities while protecting investor interests.
In the UK, the Financial Conduct Authority (FCA) opened applications for crypto-asset authorisation on 30 September. Firms must apply by 28 February 2027, ahead of the regime taking effect on 25 October 2027.