The European Securities and Markets Authority (“ESMA”) has published guidelines on supervisory practices for competent authorities to prevent and detect market abuse under the Markets in Crypto-Assets Regulation (“MiCA”).
The aim of these guidelines is to instil general principles of high-quality and effective supervision of market abuse in crypto-assets, while also setting out specific practices for national competent authorities (“NCAs”) to ensure a uniform approach across all EU Member States (“MS”).
These guidelines are mandated by MiCA, which empowers ESMA to issue supervisory guidance to promote consistency among competent authorities in the detection and prevention of market abuse.
ESMA acknowledges the rapid evolution of crypto markets and calls for increased vigilance regarding the risks outlined in the guidelines. A risk-based and proportionate approach to enforcement is expected from NCAs.
Within this risk-based framework, NCAs must also consider emerging risks of market abuse and be sufficiently agile to respond within reasonable timeframes. NCAs are expected to conduct market surveillance using publicly available data, regulatory data on orders and transactions obtained from Crypto-Asset Service Providers (“CASPs”), reconciliation of on-chain and off-chain data, cross-market data, and CASP communications, including those via web platforms, social media, blogs, newsletters, and podcasts. The guidelines also support the use of automated monitoring systems capable of identifying patterns, keywords, and trends, while emphasising that these systems should be supplemented by human oversight.
Competent authorities are expected to play an integral role in fostering a common EU supervisory culture. ESMA, through these guidelines, calls on NCAs to share relevant information to facilitate a shared understanding of market integrity risks.
The guidelines also mandate that competent authorities have the necessary resources and qualified staff to effectively fulfil their supervisory responsibilities over crypto-asset markets. Moreover, open dialogue between stakeholders and competent authorities is encouraged to support a dynamic and informed supervisory approach.
Competent authorities are specifically tasked with supervising the arrangements, systems, and procedures of persons professionally arranging and executing transactions (“PPAETs”), to ensure ongoing effectiveness in preventing and detecting market abuse, as required under MiCA and the RTS on Suspicious Transaction and Order Reports (“STORs”). This supervision must be risk-based and proportionate to the nature and scale of the PPAET’s operations—for instance, distinguishing between CASPs that operate trading platforms and those that merely execute or transmit client orders.
Upon receiving a STOR, authorities must follow clear and proportionate procedures with defined steps for analysis and criteria to grade behaviours based on severity and recurrence. The supervisory response must reflect the seriousness of the threat identified.
In cross-border cases, coordination with ESMA is encouraged where multiple jurisdictions are involved, or where uncoordinated action could compromise the investigation or impose unnecessary burdens on market participants. Obstacles arising from third-country structures or legal frameworks should also be reported, with efforts made to agree on a coordinated supervisory approach.
These guidelines will apply within three months of publication, and within two months, competent authorities are required to confirm their intention to comply therewith.
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Author: Dr Neil Gauci