EBA and ESMA release joint guidelines for crypto entity suitability

The guidelines seek to evaluate the suitability of shareholders or members, whether direct or indirect, who hold qualifying stakes in ART or CASP issuers

By Shashank Bhardwaj

Published: Oct 25, 2023 08:08:38 PM IST

Updated: Oct 25, 2023 08:40:10 PM IST

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The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly introduced a consultation paper on October 20.

It features two drafts that pertain to evaluating the suitability of members in the management body and shareholders or individuals holding qualifying stakes in issuers of asset-referenced tokens (ARTs) and crypto asset service providers (CASPs).

These guidelines seek to evaluate the suitability of shareholders or members, whether direct or indirect, who hold qualifying stakes in ART or CASP issuers. This includes granting authorization for ART and CASP issuance and conducting prudential assessments for potential acquisitions.

Additionally, the guidelines offer standardised criteria for evaluating their knowledge, expertise, integrity, and ability to dedicate adequate time to fulfil their responsibilities.

The goal is to safeguard the integrity of the cryptocurrency market and foster trust in associated services. They aim to minimise discrepancies in rule application and arbitrage.

These developments come as the EBA and ESMA received dual mandates under MiCA to issue guidelines related to the suitability of management body members, shareholders, and members with qualifying holdings in issuers of ARTs and CASPs.

The guidelines aim to achieve clarity and harmonisation in the evaluation of management body members, shareholders, and members with qualifying holdings.

The consultation process for these guidelines allows stakeholders to provide comments and insights. Interested parties can participate in a virtual public hearing scheduled for January 11, 2024, from 9:00 to 13:30 CEST. Interested stakeholders to register for the event using this link before 4:00 PM CEST on January 9, 2024. Registered participants will receive details for joining the meeting.

You can also share your feedback on this consultation with the EBA by utilising the "send your comments" button on the consultation page. The deadline for comment submissions is January 22, 2024.

The EBA will relay all received comments to ESMA. Unless otherwise requested, all contributions will be made public after the consultation.

These coordinated efforts by the EBA and ESMA reflect a commitment to regulating and stabilising the crypto landscape in the European Union.

As the cryptocurrency sector evolves, these regulatory developments will play a crucial role in ensuring its integrity and security. Businesses and investors in this space should remain vigilant and responsive to these evolving regulatory frameworks.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash