The European Securities and Markets Authority (ESMA) on Friday issued a warning to crypto-asset service providers (CASPs) across the European Union, cautioning them against misleading customers about which of their products fall under the bloc’s newly implemented crypto regulations.
ESMA said some crypto firms have been offering both regulated and unregulated services, which may create confusion among clients about the level of investor protection attached to their products.
The warning follows the application of the Markets in Crypto-Assets Regulation (MiCA), the EU’s landmark crypto rulebook that took effect earlier this year.
The regulator said CASPs must clearly differentiate between services that benefit from MiCA protections and those that do not.
These protections include conflict of interest management, complaint handling requirements, safeguarding of client assets, and supervision by national authorities.
ESMA noted there is a risk of a “halo effect” where a provider’s regulated status under MiCA gives clients a false sense of security regarding unregulated products offered through the same platform.
The agency highlighted that some firms have used their MiCA-authorised status as a marketing tool, potentially leading customers to believe that all their services are covered by EU regulations.
To mitigate these risks, ESMA outlined specific guidance for CASPs. Service providers must ensure regulatory status is clearly communicated at every stage of the sales process, not just buried in terms and conditions.
Marketing materials must explicitly state whether a product or service is regulated or unregulated. Websites must also separate content and documentation related to regulated and unregulated activities.
Additionally, ESMA said firms should provide pop-up warnings before clients access unregulated products, requiring explicit acknowledgment from users that they understand the lack of regulatory protections.
The identity and legal status of the entity offering each product must also be made clear.
The statement underscores growing scrutiny from European authorities as crypto markets expand. It also signals a push to prevent regulatory arbitrage and ensure consistent investor protection standards within the EU’s financial system under MiCA.