Entities Offering Crypto Derivatives Likely Fall under Specific Rules: ESMA
The European Securities and Markets Authority (ESMA), the financial markets regulator and supervisor in the European Union, issued a notice to remind entities to assess investment vehicles providing leverage exposure to cryptocurrencies.
In a Tuesday notice, ESMA said that derivatives products, including those marketed as “perpetual futures or perpetual contracts” tied to cryptocurrencies like Bitcoin (BTC) or Ether (ETH), likely fell within the scope of intervention measures applied to contracts for differences, or CFDs. The EU Authority warned companies to “take appropriate steps to identify, prevent, or manage conflicts of interest that may arise from the offering of these products.”
“Where these derivatives meet the definition of a CFD, they are subject to the applicable product intervention requirements, including leverage limits, a mandatory risk warning, a margin close-out and negative balance protection, and the prohibition of monetary and non-monetary benefits,” said ESMA.
The EU agency, which tracks compliance with the region’s Markets in Crypto Assets (MiCA) framework, was established in 2011 as part of oversight into investor protection in financial markets. ESMA has issued similar warnings to entities tied to digital assets, including a January publication targeting financial influencers potentially promoting “volatile cryptocurrencies.”
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Bill Hughes, senior counsel and director of global regulatory matters at Consensys, responded to the ESMA notice on X:
“[T]he statement clearly broadcasts that European authorities are closely watching the leveraged crypto-derivatives space. Rebranding a product as a ‘perpetual future’ will not insulate it from CFD restrictions if its characteristics match the definition […] Firms offering leveraged derivatives to retail clients in the EU must revisit their product analysis, distribution strategies, and governance frameworks — or EU regulators will do it for them.”
Kraken announces “perpetual futures” product amid ESMA notice
Although not specifically targeting EU markets under MiCA, cryptocurrency exchange Kraken announced on Tuesday that it had listed “perpetual futures tracking tokenized versions” of “major equity indices, gold-backed ETFs, and leading public companies.”
The products will be available to residents of more than 110 countries outside the US. However, a Kraken spokesperson told Cointelegraph that the product is “not available to EU clients at launch.”
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