MiCA and Reverse Solicitation

Non-EU or non-MiCA compliant entities that want to offer or provide crypto-asset services to clients in the EU must be aware of the newly drafted guidelines from the European Securities and Markets Authority (ESMA). The implementation of the Markets in Crypto-Assets Regulation (MiCA) in the European crypto regime is set for June 2024, with its remaining sections to follow in December 2024. This schedule has prompted ESMA, the authority responsible for implementing and supervising MiCA, to publish a consultation paper regarding the guidelines on the conditions for applying the reverse solicitation exemption under MiCA.

Reverse Solicitation

Before delving into the guidelines, it’s important to explain the term “reverse solicitation.” This term refers to a situation in which a client from one jurisdiction initiates contact with a service provider based in another jurisdiction, on its own accord, to request services or products. This is in contrast to a situation where the service provider offers services in jurisdictions where it may lack the necessary licensing or authorization to operate.

It’s essential to clarify that the reverse solicitation exemption is applicable solely to firms from outside the EU. As a result, firms within the EU cannot use this exemption as a means to circumvent MiCA’s obligations for authorization.

Under MiCA, a critical aspect for non-EU crypto firms is the reverse solicitation exemption. This rule allows firms from outside the EU to offer crypto-asset services to EU clients without requiring MiCA authorization.

Tightly Regulated Exemption

ESMA tightly regulates the exemption, ensuring non-EU firms refrain from actively marketing to EU clients under strict conditions. The broad definition of solicitation encompasses a wide range of communications and promotional strategies, aiming to ensure firms cannot subtly circumvent the regulations.

ESMA underscores the critical aspect of timing when it comes to non-EU firms taking advantage of the exemption. Furthermore, companies should be cautious about extending their offers to additional crypto-assets or services beyond the initial client-requested service. Expanding the offer beyond what the client initially requests or beyond the time frame that the guidelines define could result in considering it a violation of the exemption conditions.

The guidelines determine when non-EU firms engage with the EU market and when they don’t seek EU clients. They also ensure clarity on compliance with the regulatory framework.

With the implementation of MiCA drawing near, we invite entities in the crypto and blockchain sectors to consider this pivotal moment as a prime opportunity. For non-EU or non-MiCA compliant entities looking to service EU clients, it’s crucial to understand the reverse solicitation exemption under MiCA for seamless navigation of the EU’s regulatory framework.

ESMA encourages market participants to share their feedback and insights on these draft guidelines by April 29, 2024.

***

Barnea Jaffa Lande’s Capital Maret Department is at your service to answer questions about MiCA and its requirements. Andrey

Adv. Andrey Yanai is a partner in the Capital  markets Department.

Adv. Avihai Tal is an associate in the department.