The European Securities and Markets Authority (ESMA) has called for amendments to the European Union’s Cryptoassets Market Regulation (MiCA), expressing concern over the structure of the current framework.
On October 16, ESMA issued an official opinion to the European Commission requesting amendments to strengthen regulatory oversight in the virtual currency sector.
“While ESMA acknowledges the legal restrictions raised by the Commission, it emphasizes the importance of the policy objectives behind the original proposal,” the regulator wrote, citing the need for stronger standards in the virtual currency market. emphasized.
ESMA’s recommendations focus on improving two key Regulatory Technical Standards (RTS) within MiCA.
These RTSs cover important elements such as disclosure regarding intent to provide cryptographic services and the process of obtaining authorization as a crypto asset service provider (CASP).
One of the key changes that ESMA is proposing is the requirement for an external cybersecurity audit for CASP applicants.
According to the regulator, applicants must provide an external assessment of the soundness of their management team, along with confirmation that the organization has no record of penalties across sectors such as commercial law, insolvency law and anti-money laundering (AML). need to.
The regulator also emphasized the need to check involvement in fraud, professional liability and other financial services-related misconduct.
“This will increase the resilience of the crypto asset market and strengthen investor protection in the crypto asset space,” ESMA noted, underscoring the importance of these strict entry requirements for service providers.
ESMA believes that these adjustments will ensure a more robust vetting process for applicants seeking to provide virtual currency-related services in the EU.
By increasing oversight, regulators hope to strengthen market resilience and build investor confidence in the cryptocurrency ecosystem.
The final decision on whether to incorporate the ESMA amendments now rests with the European Parliament and the European Council.
The council has the power to adopt the RTS with amendments or reject it entirely.
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Meanwhile, the European Parliament retains the power to object to the revised RTS proposed by the European Commission within three months.
These regulatory efforts come as the EU prepares for the final implementation of MiCA, scheduled to come into force on December 30, and are critical in the region’s efforts to comprehensively regulate digital assets. It becomes a moment.
In a statement shared with Benzinga, Anthony Yong, global head of strategy and development at blockchain protection company Coincover, said the Web3 industry will need to continue to grow and become attractive to the next wave of users. He said cyber protection rules must go beyond the immediate economic impact. , a company’s reputation is unnecessarily damaged by incidents of theft and hacking, and broader trust in the marketplace is also damaged.
“Centralized exchanges in particular have become prime targets for hackers who are becoming increasingly innovative in their approach. Regular external security audits will certainly help the industry improve, but this threat “They cannot be completely eliminated. Cryptocurrency companies must continue to invest in user-focused threat prevention and recovery technologies to fully harden their security infrastructure.” .
The evolving landscape of cryptocurrency regulation will take center stage at Benzinga’s Future of Digital Assets event on November 19th.
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