Founded in 2011 in Paris, the ESMA has an objective to develop a uniform rulebook for European Union (E.U.) financial markets, as well as provide market supervision. The authority has established Technical Committees in various industrial fields, including information technology (IT), and also works in the field of securities legislation and regulation.
In its 2019 Annual Work Program, the ESMA cites a 1.1 million euro program and its objectives for the next year, which include regulation and supervisory treatment of new financial activities, focusing on fintech and crypto assets.
Within the announced framework, the ESMA will identify risks related to such activities and trends, and provide relevant advice and proposals where needed. Additionally, the ESMA has set a goal to provide guidance and facilitate the implementation of the Markets and Financial Instruments Directive (MiFID) in order to make markets more transparent. The program will:
“Achieve a coordinated approach to the regulation and supervisory treatment of new or innovative financial activities and provide advice to present to the E.U. institutions, market participants or consumers.”
Last month, the ESMA announced its plans to extend restrictions on contracts for differences (CFDs), including crypto-based ones. The agency justified its move with "significant investor protection concern" associated with the offering of CFDs to retail clients.
Earlier in March, the ESMA had strengthened its requirements for CFDs. "Due to the specific characteristics of cryptocurrencies as an asset class the market for financial instruments providing exposure to cryptocurrencies, such as CFDs, will be closely monitored, and ESMA will assess whether stricter measures are required," the regulator explained.
In September, Belgian think tank Bruegel called on E.U. ministers for unified legislation on cryptocurrencies and more scrutiny on how they are distributed to investors. The move reportedly comes in order to manage associated risks while realizing the potential of blockchain technology.