The
European
Securities
and
Markets
Authority
published
some
clarity
on
Wednesday
for
crypto
companies
dealing
with
overseas
firms
to
prevent
them
breaking
the
Markets
in
Crypto
Assets
rules
(MiCA).
Companies
that
are
not
authorized
to
operate
in
the
trading
bloc
of
27
nations
cannot
provide
any
services
to
European
Union
clients
unless
those
clients
reach
out
first.
With
Thursday’s
guidance,
ESMA
wants
to
prevent
unauthorized
companies
from
finding
loopholes
to
proactively
reach
out
to
EU
clients.
The
opinion
by
ESMA,
an
independent
EU
body
tasked
with
investor
protections,
detailed
actions
it
believed
could
be
unlawful
solicitation
of
clients.
The
regulator
said
it
would
be
illegal
for
an
EU-authorized
broker
to
systematically
route
orders
it
receives
to
a
group’s
execution
venue
if
that
group
is
located
outside
the
EU
and
the
broker
hasn’t
explored
any
alternative
options.
ESMA
also
deemed
it
unlawful
for
legal
brokers
to
rely
on
the
brand
of
an
overseas
exchange
when
advertising
to
attract
business
from
EU
citizens
to
the
point
that
it
makes
it
difficult
to
distinguish
its
services.
Included
in
the
mix
of
illicit
activity
would
be
if
the
authorized
broker
has
limited
revenue
from
EU
clients
“or
has
revenue
flows
that
significantly
diverge
from
what
would
be
expected
where
an
independent
broker
and
independent
execution
venue
interact,”
the
paper
said.
MiCA
does
allow
EU-authorized
brokers
to
offer
exchange
services
such
as
exchanging
crypto-assets
for
funds
or
other
crypto-assets
to
EU
clients,
and
to
enter
into
agreements
with
non-EU
entities
to
both
manage
liquidity
and
hedge
their
risk,
ESMA
said.
However,
companies
“should
pay
close
attention
to
situations
where
an
established
hedging
scheme
has
the
main
purpose
or
effect
to
channel
EU
order
flows
systematically
and
automatically
to
a
unique
non-EU
execution
venue
and,
in
particular,
where
this
non-EU
execution
venue
is
part
of
the
same
group,”
the
report
said.