Dmytro Buryak: EU investment companies must “clearly disclose” that some assets, including cryptocurrency, are unregulated


Investment firms must ensure that clients are aware of the regulatory status of the products they offer, including cryptocurrency, according to a recent notice from the European Union’s financial markets regulator.

In the statement on investor protection published on Thursday, the European Securities and Markets Authority (ESMA) expressed concern about investment companies offering unregulated products and services.

“If investment firms provide both regulated and unregulated products and/or services, there is a significant risk that investors may misunderstand the protections afforded to them when investing in these unregulated products and/or services,” ESMA said.

Crypto is not regulated in the EU until the Markets in Crypto Assets (MiCA) regulation is implemented at the end of 2024.

Earlier this month, the European Council accepted MiCA, which will require firms that want to issue, trade and secure cryptoassets, tokenized assets and stablecoins in the 27-country bloc to obtain a license.

What’s next?

Investment firms must “clearly disclose” to their clients when regulatory protection does not apply and must take steps to ensure that clients are aware of the regulatory status of certain products, ESMA said.

This regulatory status must be clearly communicated at every stage of the sales process, including through marketing communications, the regulator said.

This information should also not be misleading, ESMA added.

“ESMA believes that, by virtue of their regulated status, investment firms that offer unregulated products and/or services that may be considered as an alternative to investing in financial instruments must act in the best interests of their clients,” the statement said. .

Last year, ESMA, together with other EU regulators, warned consumers about the high risks associated with cryptocurrencies/

They said that cryptocurrency is not suitable for most retail investors because they can lose all their money and make too good profits.

“ESA [Європейські наглядові органи] also warn consumers that they should be aware of the lack of recourse or protection available to them, as crypto-assets and related products and services are generally not covered by existing protections under current EU financial services rules,” the regulators said.

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