A European Union financial watchdog has issued a statement reminding investment firms to ensure their clients are aware of the regulatory status of the products they offer.
In an announcement, the European Securities and Markets Authority (ESMA) highlighted crypto assets and reminded companies that although regulation is in the works, crypto assets will remain unregulated in most jurisdictions. ESMA stated:
“Specifically on crypto assets, while the Markets in Crypto-Assets (MiCA) law is close to adoption, crypto assets offered by investment firms will remain unregulated in most jurisdictions until MiCA is implemented.”
ESMA expressed concern about the supply of unregulated products and services. According to the regulator, these carry prudential and investor protection risks. In addition, the financial watchdog believes that it is possible for customers to be “misled as to the level of protection they get.”
So #ESMA warns investors of risks that arise when investment firms offer both regulated and unregulated products and/or services.
remind firms of the behaviors they are expected to adopt
firms may not benefit from regulatory protections https://t.co/TT3CQFgeKs pic.twitter.com/5CPrrbbvid— ESMA – EU Securities Markets Regulator (@ESMAComms) May 25, 2023
To mitigate these risks, ESMA recommended that investment firms take steps to ensure that their clients are aware of the regulatory status of the products in which they invest. The regulator also advised companies to clearly inform customers when regulatory protections do not apply to their products or services.
In addition, ESMA urged investment firms to take into account the impact of unregulated activities on their business when designing risk management policies and systems.
Meanwhile, cryptocurrency companies are starting to establish a presence in Ireland to expand their business in Europe. On May 25, the cryptocurrency company Gemini chose Ireland as its European headquarters. Gemini founder Cameron Winklevoss confirmed that the company had chosen Ireland as its “entry point into the EU”.
In addition to Gemini, cryptocurrency exchange Kraken has also started preparations to expand its operations in Europe. On April 18, a subsidiary of the Dublin-based exchange received virtual asset service provider authorization from the country’s central bank.
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Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.