Today the European Securities and Markets Authority (ESMA) launched two consultations relating to the MiCA crypto-asset regulations. One relates to third country firms offering services to EU residents. The other is the thorny topic of when a crypto-asset will be considered a financial instrument (under MiFID II) versus a crypto-asset utility token according to MiCA, which is a lighter touch. The consultation runs until April 29.
Last year, Europe passed its Markets in Crypto-Assets (MiCA) regulations. In contrast with the United States, Europe’s MiCA doesn’t consider most cryptocurrencies as securities. But it depends. Most utility tokens relating to layer 1 or layer 2 blockchains are likely to fall under the MiCA crypto regulations.
However, quite a few tokens issued by DeFi applications could be classified as financial instruments and fall under MiFID II. In that case, they require the issuer and instrument to be fully regulated.
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