On 29 January 2024, the European Securities and Markets Authority (ESMA) published a Consultation Paper on reverse solicitation guidelines under the EU Markets in Crypto-Assets Regulation (MiCA). The objective of the Guidelines is to establish consistent supervisory practices amongst EU financial regulators with regard to the interpretation and application of the reverse solicitation exemption under Article 61 MiCA.
MiCA requires that crypto-asset services are provided to EU clients only by licensed entities established in the EU. Entities are deemed to provide crypto-asset services to EU clients—thereby trigger-ing the license requirement—if they solicit EU clients or promote or advertise crypto-asset services in the EU. Third-country firms, i.e., firms established outside the EU that are not licensed under MiCA, are therefore prohibited from soliciting EU clients or promoting or advertising crypto-asset services in the EU. The reverse solicitation exemption under Article 61 MiCA provides that, where an EU client initiates at its own exclusive initiative the provision of a crypto-asset service or activity by a third-country firm, the license requirement under MiCA shall not apply to the provision of that crypto-asset service or activity to the third-country firm to that client, including a relationship specifically relating to the provision of that crypto-asset or activity. In other words, the reverse solicitation exemption allows third-country firms to provide crypto-asset services to EU clients who approach such firms at their own exclusive initiative without having to obtain a license under MiCA.
According to the ESMA draft Guidelines, the term 'solicitation' should be construed broadly and in a technology neutral way. Solicitation refers to the promotion, advertisement or offer of crypto-asset services or activities to EU clients or prospective clients in any way. It includes, but is not limited to:
An assessment whether third-country firms solicit EU clients should be made on a case-by-case basis. A website in an official language of the EU (other than English) should be strong indication that a third-country firm is soliciting EU clients. Conversely, geo-blocking to prohibit access to a website by EU clients would be a strong indication that a third-country firm is not soliciting EU clients via such website.
In addition, the draft Guidelines note that solicitation may occur irrespective of the person through whom it is performed. The solicitation may be attributed to the third-country firm even if it is carried out by a person acting explicitly or implicitly on the firm's behalf (e.g., influencers). This includes solicitation done on behalf of a third-country firm by an EU-licensed entity such as a credit institution or investment firm. The draft Guidelines warn that it should be regarded as a breach of MiCA for such licensed entities to redirect clients to services provided by a third-country firm.
The draft Guidelines note that the meaning of the client's own exclusive initiative should be con-strued narrowly and assessed based on the facts. Third-country firms may not rely only on contractual arrangements or disclaimers to make use of the reverse solicitation exemption.
When approached at the own exclusive initiative of the client, the third-country firm may market to that client crypto-assets or crypto-asset services or activities of the same type. However, the timing of such marketing is critical — the third-country firm is not permitted to offer further crypto-assets or crypto-asset services or activities, even if they are of the same type as the ones original requested by the client, unless they are offered in the context of the original transaction. The draft Guidelines provide the following example:
If the client contacts the third-country firm to buy crypto-asset X, the firm may — at this point in time — market to the clients crypto-assets of the same type. However, the third-country firm would not be entitled to market further crypto-asset X transactions or transactions in similar crypto-assets to the client a month later.
The ESMA draft Guidelines caution that whether a crypto-asset or crypto-asset service is of the same type depends on a case-by-case analysis. However, such analysis should consider (i) the type of the crypto-asset or service actively offered, and (ii) the risks attached to the new type of crypto-asset or service. The draft Guidelines provide a non-exclusive list of pairs of crypto-assets which should not be considered as belonging to the same type:
Stakeholders, particularly crypto-asset service providers (including from third-countries) and financial entities dealing with crypto-assets, are invited to provide comments on the draft Guidelines by 29 April 2024. Responses can be submitted via the ESMA website. The final Guidelines are expected to be issued by 30 December 2024.
For further information on MiCA implementation, visit GoMiCA.
