The European Securities and Markets Authority (ESMA) has introduced new guidelines under the Markets in Crypto-Assets Regulation (MiCA) to enhance investor protection in the crypto-asset market. These guidelines focus on two primary areas: suitability requirements for crypto-asset services and the format of periodic statements for portfolio management services.
Suitability Requirements for Crypto-Asset Services
The guidelines outline the obligations of crypto-asset service providers (CASPs) when offering investment advice or portfolio management services. CASPs are required to assess clients’ knowledge and experience in investing, their financial situation including their ability to bear potential losses, investment objectives such as risk tolerance, and their understanding of the risks associated with crypto-assets. This comprehensive assessment ensures that any investment recommendations or portfolio management decisions made on behalf of clients are aligned with their individual profiles and risk appetites.
Format of Periodic Statements for Portfolio Management
For CASPs providing portfolio management services, the guidelines specify the format and content of periodic statements to be provided to clients. These statements must offer a fair and balanced review of the portfolio’s performance during the reporting period, the activities undertaken, and an updated assessment of how these activities align with the client’s investment preferences and objectives. The aim is to standardize these statements to enhance transparency and investor protection in the crypto-asset market.
These guidelines are part of ESMA’s broader efforts to harmonize regulatory practices across the European Union, ensuring a consistent application of MiCA’s provisions. By bolstering investor protection measures, ESMA aims to foster a safer and more transparent environment in the rapidly evolving crypto-asset market.
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