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The European Union’s 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 a statement, the European Securities and Markets Authority (ESMA) singled out crypto assets and reminded companies that while regulation is in the process, crypto will remain unregulated in most jurisdictions. ESMA stated:
“In particular with regard to crypto assets, while the regulation of crypto asset markets (MiCA) is close to being adopted, crypto assets offered by investment firms will remain unregulated in most jurisdictions until MiCA is enforced.”
ESMA has raised concerns about unregulated product and service offerings. According to the regulator, they carry prudential and investor protection risks. In addition, the financial watchdog believes that customers may be “misled as to the level of protection they receive.”
⚠️ #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 protectionshttps://t.co/TT3CQFgeKs pic.twitter.com/5CPrrbbvid— ESMA – EU Securities Markets Regulator (@ESMAComms) May 25, 2023
To mitigate such risks, ESMA has recommended that investment firms take steps to ensure that their clients are aware of the regulatory status of the products they are investing in. The regulator also recommended that firms make it clear to customers when regulatory protection does not apply to their products or services.
In addition, ESMA urged investment firms to consider the impact of unregulated activities on their business when developing policies and risk management systems.
Related: EU finance ministers approve MiCA cryptocurrency regulation
Meanwhile, cryptocurrency firms are starting to establish themselves in Ireland to expand their business in Europe. Cryptocurrency company Gemini has chosen Ireland as its European base on May 25. Gemini founder Cameron Winklevoss confirmed that the company has chosen Ireland as its “entry point to the EU”.
In addition to Gemini, the Kraken cryptocurrency exchange has also begun preparing to expand operations in Europe. On April 18, the Dublin-based subsidiary of the exchange received authorization from the country’s central bank as a virtual asset service provider.
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