ESMA Warns Crypto Platforms on MiCA Compliance

The European Securities and Markets Authority (ESMA) has issued a formal warning to crypto-asset service providers (CASPs) operating in the European Union. The warning, issued on July 11, 2025, targets misleading practices regarding the regulatory status of crypto products under the Markets in Crypto-Assets (MiCA) framework. This directive aims to protect investors by ensuring clear differentiation between regulated and unregulated services, thereby preventing potential investor confusion and maintaining market integrity.

ESMA's warning emphasizes the necessity for crypto platforms to explicitly disclose the regulatory status of their products. CASPs must clearly differentiate between services that benefit from MiCA protections and those that do not. Marketing materials must explicitly state whether a product or service is regulated or unregulated, and websites must separate content and documentation related to regulated and unregulated activities. This transparency is crucial for investors to make informed decisions and to avoid the "halo effect," where unregulated offerings might be mistakenly perceived as safe and compliant due to the regulated status of other products offered by the same platform.

The directive impacts crypto platforms offering both regulated and unregulated services. This step addresses potential reputational risks and aligns services with investor protection standards, an essential goal of EU financial regulation. The warning comes during a pivotal time for EU crypto market regulation, as the MiCA framework seeks to impose strict rules on the handling of client assets and complaint procedures. Companies offering crypto services must obtain a CASP license from a national regulator to operate across the EU, ensuring compliance with the regulatory standards set by the MiCA framework.

ESMA's concerns are not unfounded. The regulator's recent peer review criticized Malta’s Financial Services Authority for its lenient approach to granting crypto licenses. The review revealed that while Malta possesses the necessary expertise and resources to supervise crypto firms, its authorization process only partially met the expected standards. This inconsistency raises concerns about the uniformity of regulatory practices across the EU and underscores the need for enhanced market transparency and investor confidence in the evolving crypto landscape.

As ever more tokens and services integrate into the regulation ecosystem, this development underscores the dynamic balance between innovation and regulation. The effectiveness of this warning will be determined by crypto platforms' compliance and responsiveness to regulatory needs. By ensuring that investors are fully informed about the regulatory status of the products they are considering, ESMA aims to protect them from potential risks and misinformation, thereby enhancing investor protection and maintaining the integrity of the financial markets in the EU.